Prospects turn bullish for chana

Chana (or chickpea) prices have been inching higher, sustaining the uptrend over the last few months on concern over the production and lower acreage. However, it slowed during January due to better weather conditions in growing areas and the extension of duty-free import. Chana has resumed its bullish trend in the last six weeks and surged over 11 per cent, highest among all the agri-commodities traded in the derivatives market.

In 2014, chana ruled below the minimum support price (MSP) of ₹3,100 a quintal for a long time. To encourage sowing of chana, the Cabinet Committee on Economic Affairs (CCEA) increased the MSP by 2.4 per cent to ₹3,175 for 2014-15. But lower price realisation last year and a marginal increase in MSP forced farmers to ignore the crop during the rabi season.

According to Government data, rabi acreage for pulses declined by over 10 per cent to 145.92 lakh hectares, as chana was the most affected with a fall of over 16 per cent to 85.91 lh compared with last year’s 102.25 lh. Thus, this year, chana is likely to break the rising production trend of last three years.

Chana production has been estimated lower at 82.8 lakh tonnes (lt) from 93 lt in the second advance estimates by the Department of Agriculture & Cooperation (DAC). But this, too, appears unlikely. During rabi sowing in October- December, there was 33 per cent deficient rainfall across the country affecting the development of the crop. Recently, there was unseasonal rain in northern and central parts, where the chana crop was still at the pod-filling stage. This is likely to affect the quality, yield and normal harvesting. Moreover, even if we take into account an average yield of the last five years at 930 kg/hectare, the production can only be 80 lt during the current season, much less than the domestic consumption of 90-92 lt.

To ensure remunerative prices to farmers and encourage them to plant the crop, the Ministry of Agriculture imposed a 10 per cent import duty on chana till December, while for other pulses it was extended till March. However, after reviewing the sowing data and chana’s price trend, the government has extended duty free import of chana for another three months till March to help domestic prices stabilise.

During the extended duty-free import period, importers have brought in as much cargo as possible as imposition of the duty might force a price rise in the domestic market and deliver windfall gains to large inventory holders. India imported 2.22 lakh tonnes chickpeas during April-November 2014, more than 80 per cent of quantity imported during the whole of last year.

The drop in chana acreage this year comes at a time when crops in many major exporting countries have fallen too due to weaker prices. Australian chickpea production in 2014-15 slumped 31 per cent to 435,000 tonnes; Canada’s crop fell by 12 per cent to 115,000 tonnes; while the US harvest dropped 21 per cent. Lower world production has infused fresh life in the international chickpea market, supporting bumper exports and sending prices zooming. Exporters around the world – mainly Canada, US, Australia and Myanmar – are hoping for good export volumes to India at reasonably higher prices.

The new season chana crop will hit the market soon and the arrival tends to put pressure on the prices during March-April. But, for the current season prices are expected to remain higher compared with last year. Duty-free imports till December and its extension till March too have not helped stabilise prices due to good domestic demand, low production and comparatively more expensive imports. Chana prices will rule steady during peak arrival period and then are likely to move up once arrivals begin to peter out in May-June.

The writer is Associate Director - Commodities & Currencies, Angel Commodities Broking. Views are personal.

COMMENT NOW