The Hindu Business Line : Urad prices dip on hopes of better crop

Urad (black matpe) price have softened a bit during the last two weeks after touching a record Rs 4,350 a quintal for the superior quality. The prices have declined on expectations of a bumper crop in the rain-fed areas and relaxation of quality norms in the commodity exchanges.

"The crop in the rain-fed areas is likely to arrive in the market around December end. Though small, the 30,000-40,000 tonnes crop matters a lot in a market looking for supplies," said trade sources.

Currently, superior quality urad is quoted at Rs 3,800-3,850 in Chennai, while fair average quality, which touched a high of Rs 3,900, has slipped to Rs 3,300 a quintal.

Urad prices have galloped this year mainly on supply concerns with the crop being hit by adverse weather in States such as Maharashtra, which produces nearly 40 per cent of the 10 lakh tonnes produced in the country.

On NCDEX, November contracts are quoted at Rs 3,712 a quintal, while December contracts are ruling at Rs 3,488. January contracts are being traded at Rs 3,366, while March and April contracts are a tad above Rs 3,000. On MCX, December contracts are ruling at Rs 3,588 and January at Rs 3,473.

Higher margin

According to trade sources, spot prices are higher since physical stocks are very low. The other reason for future prices to rule below spot is that the margin for pulses such as urad is higher, resulting in lower participation by market forces.

"Anyone wanting to take positions in urad futures will have to pay 50 per cent margin. Very few are willing to do that," the sources said.

Supply from the kharif crop is consistent and apart from the crop in the rain-fed areas, the main "Mahani" or the crop from the irrigated areas will hit the market from around March.

"By first week of January, we should have the crop from the rain-fed areas arriving in full swing," the sources said. "The crop of rain-fed and irrigated areas is expected to be good and it is one of the reasons for the prices easing," they said.

Prices may not witness volatility at least until December. "After that, prices could stabilise or increase based on the inputs we get from the growers," the sources said. "Prices may not fall after December third week as all bearish factors would have been discounted," they said.

The crop is expected to be better during rabi what with farmers opting to go for pulses in a bigger way and switching over from oilseeds. As of November 16, the area under pulses was up at 69.85 lakh hectares against 61.77 lakh hectares during the corresponding period last year.

"However, weather holds key to a good crop. If it plays truant, then we could face a similar situation like this year," the sources said.

According to Kotak CSL Research report on Monday, a gradual increase in warehouse stocks suggests that there is a possibility of higher deliveries for December contract and prices could head south.

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