The Hindu Business Line : Crash in urad prices leaves growers worried

Behind the fall
Urad prices have crashed to Rs 2,700-2,800 a quintal currently
The ban on futures trade in pulses such as urad is also being blamed for lower price

M.R. Subramani

Chennai, Oct. 19 Urad (black matpe) prices have declined at least 30 per cent during the past year that pulses trade fears whether farmers will go in for it against next year.

According to trade sources, urad prices have crashed to Rs 2,700-2,800 a quintal currently. During the same time a year ago, it ruled at Rs 4,300.

Farmers’ hopes

“Farmers would have gone in for cultivation of the urad crop hoping that they will get a remunerative price, especially they way it ruled last year. However, prices have crashed that has left them a little worried,” said a South-based trader.

But sources in Maharashtra say the fall in prices could be “momentary” and prices could increase in the next week or so, particularly with the festival season yet to end.

“But the point to note is that half of the festival period has lapsed. And farmers need cash for festivals that they will sell without thinking about the price. In fact, they are currently on a selling spree,” the trader said. “Arrivals have begun. The only consolation is that prices have improved marginally since last week,” he said.

Trade divided

The trade is also divided over the impact of the rains that lashed various parts of the country last month. While one section says there has been 25 per cent damage to the crop, especially in Maharashtra, another says the damage has been minimal.

The annual urad crop is around 18 lakh tonnes. Of this, 11 lakh tonnes are produced during kharif and the rest during rabi. Again, Maharahstra accounts for nearly 40 per cent of the kharif crop, followed by Madhya Pradesh and Andhra Pradesh.

“There is no reason for such a crash in prices. One, stocks are low. Two, there are no stocks coming in from Myanmar,” said the sources.

In view of the civilian protest against the military junta in Myamar since the last week of September, loading of ships has come to a total halt.

“Not only that, since the unrest prices of Myanmar urad have increased,” they said.

Myanmar price

Fair quality urad, whose quality is a little lower than the commodity that is grown in the country, is currently quoted at $660 (Rs 26,250) a tonne. Before the civilian unrest, it ruled at $550 (Rs 21,900).

“Since there are no shipments from Myanmar, the prices have to go up. That is not happening and this could hurt the farmers badly,” said the sources.

A section of the trade blames the government agencies such as the National Agricultural Cooperative Marketing Federation (Nafed) for the sharp drop in prices. “Agencies such as Nafed are floating tenders for 100 and 200 tonnes. Such moves are unnerving the market,” a Mumbai-based trader said.

Ban on futures

The ban on futures trade in pulses such as urad is also being blamed for the lower price. “Futures market was a good tool for price discovery. Unfortunately, the Centre panicked when the prices increased and banned it,” the sources said.

“What people have to bear in mind is that urad prices increased only last year after ruling flat for almost a decade,” they said.

A panel was formed by the Centre with Prof Abhijit Sen as its head to study whether futures market had any effect on foodgrain prices. The panel has yet to submit its report, though Prof Sen has categorically said it would not recommend a ban on futures. He has said the panel would suggest ways to minimise the effect of futures trade on spot prices.

The ban came into effect in June last year and was initially for six months. However, in view of a higher rate of inflation, the Centre has extended it for an indefinite period. The Finance Minister, Mr P. Chidambaram, has said the Abhijit panel recommendation would hold the key to removing the ban. “It is only a matter of time before futures are introduced again. But by that time, given the demand-supply scenario, it is possible that middlemen could gain from the crash in prices,” sources said.

Encouraged by the higher prices, farmers had gone in for increased cultivation of pulses, particularly tur, urad and moong during the kharif season. Area under urad this year has increased to 26.85 lakh hectares against 24.75 lakh hectares last year. Overall, pulses acreage has improved 10 per cent this year.