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Many farm commodities selling below last year’s levels

    Vishwanath Kulkarni
    Harish Damodaran
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The other side of food inflation

Talk of an agricultural bear cycle may sound absurd with consumer food inflation at almost 15 per cent in November.

Try telling this, for example, to the Congress that was felled by the aam aadmi, onions and tomatoes in the recent polls.

But lurking beneath the surface of spiralling vegetable and fruit rates is a contradictory phenomenon of — "price moderation" in a host of other farm commodities.

“I prefer calling it that than a bear cycle,” said Ashok Gulati, Chairman, Commission for Agricultural Costs and Prices.

Two crops where this phenomenon has become serious enough to receive political attention are sugarcane and rubber.

Bearing it out

Uttar Pradesh has seen a delayed start to crushing operations this season, with mills refusing to pay even the cane price for 2012-13.

Their logic: ex-factory sugar realisations currently ruling Rs 1.50/kg below last year.

Sliding natural rubber prices — to Rs 152/kg from Rs 163 in 2012 and from Rs 200 in 2011 — have led growers in Kerala to demand a ban on duty-free imports against advance licences by tyre makers.

But it’s not sugarcane and rubber alone. At the Gondal market in Gujarat’s Saurashtra region, farmers are selling groundnut at Rs 3,300-3,400 a quintal.

This is not only below last year’s Rs 5,100 levels, but even the official minimum support price (MSP) of Rs 4,000.

“There’s lot of distress sales happening. The Government should procure actively and also allow exports of groundnut oil in bulk, as against only small consumer packs now,” said B.V. Mehta, Executive Director, Solvent Extractors’ Association of India.

Good monsoon

In chana (chick-pea), too, prices in major mandis of Madhya Pradesh are hovering around Rs 600 below the MSP of Rs 3,000 a quintal.

This, for a crop harvested some seven months ago.

According to Pravin Dongre, Chairman, Indian Pulses and Grains Association, the bearish sentiment is equally in anticipation of higher sowings this time because of good monsoon.

The Agriculture Ministry’s own data shows a 4.7 lakh hectares jump in chana plantings in the ongoing rabi season over last year’s progressive coverage.

“Right now, the market prices of kharif pulses such as arhar (pigeon-pea) are just around their MSPs. But even these could come under pressure as arrivals pick up,” added Dongre.

The Great Moderation

Gulati felt that the moderating trend is clear in sugar, oilseeds/edible oils, pulses and even coarse cereals: prices of maize and bajra (pearl-millet) have dipped below their respective MSPs of Rs 1,310 and Rs 1,250 a quintal.

“The declines are linked to the general softening of global prices since 2011, the effects of which are now being felt and magnified by a bumper domestic harvest. You can see it in maize, where our export competitiveness has been hit,” he pointed out.

The global glut has also hit price realisations for coffee growers in Karnataka and Kerala.

“We are getting squeezed both from higher production in Brazil and Vietnam and rising labour and input costs back home,” complained N. Bose Mandanna, a planter from Suntikkoppa in Karnataka’s Kodagu district.

The Exceptions

The only crops where prices are still holding out are cotton and soyabean.

In cotton, the support is coming mainly from lower arrivals (notwithstanding a record 37.5 million bale crop) and export demand from China.

Soyabean farmers have similarly been helped by strong purchases from Iran (thanks to the unique rupee trade mechanism for bypassing western sanctions) and Japan.

They have also been holding back their crop, just like their cotton-growing counterparts.

A clear picture of the price trend in both will emerge once arrivals start peaking.

Soyabean will be particularly tested when the Latin American crop starts coming from end-January.

Which is the crop to experience maximum decline, due to the drying up of global demand and munificent monsoon?

The answer is guarseed. It is now trading under Rs 4,500 a quintal or a third of its levels last year!

(This article was published on December 15, 2013)
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