The Hindu Business Line : White arecanut growers holding on to stocks

The unfolding events
Currently, white arecanut is ruling at Rs 72-76 a kg
But in the grey market, it is bought at Rs 86 a kg
Co-ops fear that fall in prices could trigger panic selling

Mangalore , April 2

White arecanut growers are in a dilemma, whether to release the stock into the market at the existing price or to hold it for some more time.

Their dilemma is due to the experience they had in 2000 when the price of white arecanut crossed Rs 100 a kg. However, it did not sustain for long and the price came down quickly. Some growers, who then thought that the price would go up further, had to sell the commodity at cheaper prices.

Speculations are now rife that the price of the new stocks of white arecanut will cross Rs 100 a kg during this season.

While the new stocks command a price of around Rs 72-76 a kg in the regulated market, traders in the grey market buy the stock at around Rs 82-86 a kg.

The major arecanut cooperatives such as MASS — Mangalore Agriculturists Sahakari Sangha (formerly Mangalore Agriculturists Souharda Sahakari) Ltd — and Central Arecanut and Cocoa Marketing and Processing Cooperative (Campco) Ltd have urged the growers to release arecanut stocks into the market at regular intervals to maintain stability.

Stocks shortage

The market, which is facing shortage of arecanut stocks, will be flooded with stocks once there is a downward trend in prices. The growers holding back the commodity will resort to panic selling then. The decline in the yield of the commodity and holding back of stocks by growers has led to shortage of stocks in the domestic market.

Mr Sridhar Bhide, MASS Director, told Business Line that holding back of stock by the growers has created shortage in the market. To maintain stability, they should release it steadily in the market. The officials of Campco endorse this view.

Citing the market condition of 2000, Mr Bhide said though the price of arecanut touched Rs 135-150 a kg during that year, the collapse of the market was also quick. The growers, who held back the stock, sold it at cheaper price . Had they supplied the commodity at regular intervals then, the price would have stayed steady.

Mr M. Srinivasa Achar, President of the All-India Areca Growers' Association, said growers would definitely look at better prices for their commodity. The cost of production of white arecanut varies between Rs 60 and Rs 80 a kg.

Manipulation?

Market sources said it was not exactly the consumption demand. Some of the big traders in northern India, who are buying the commodity in big quantities, are responsible for the present bullish trend in the arecanut market. To book profits, they may also resort to selling the commodity in future. The growers holding back the commodity would be affected, if the traders go on profit booking. That might lead to volatility in the market, they added.

Arecanut futures

The introduction of arecanut in the futures market has come as a pleasant surprise for some growers, though most growers are not aware of the fact.

The MCX (Multi Commodity Exchange of India Ltd) launched futures trading in white arecanut on March 28. To begin with May and June contract will be offered for trading.