Commodity commentary. Pulses demand-supply scenario turning worrisome

The pulses situation is turning potentially explosive. 2014-15 is likely to witness lower production, breaking the rising trend of last two years. As a consequence, imports are expected to surge to new highs to meet the supply shortfall.

Rabi acreage for pulses is lagging by over 10 lakh hectares overall, casting doubts about the quantum of harvest. Chana (desi chick pea) is the worst affected with a fall of 13 lakh hectares in planted acreage as compared with last year. Chana is the country’s largest pulse crop.

The Rabi season pulse production target of 125 lakh tons appears most unlikely to be achieved. On current reckoning, pulses harvest could fall short of the target by 10-12 percent and as much as 20 lakh tons below last Rabi’s production of 133 lakh tons.

Earlier, the kharif crop performance too was far from satisfactory. Against production target of 70 lakh tons and last year’s kharif harvest 60 lakh tons, actual production was an estimated 52 lakh tons. So, the expected lower Rabi output coming on top of a decline in kharif output means the demand-supply gap is to widen.

No wonder, import volumes are expanding rapidly. Arrivals in the first seven months of the 2014-15 fiscal (April to October 2014) were 21.2 lakh tons, higher than 17.5 lakh tons during the corresponding period in the previous year. Monthly arrivals have jumped from an average of 2.5 lakh tons to well over 3.0 lakh tons in recent months.

November and December arrivals were an estimated 6.5-7.0 lakh tons taking the total close to 28.0 lakh tons. Given the tight supply situation, arrivals during January-March are widely expected to be 11-12 lakh tons. In other words, in the current fiscal, pulses imports can test 40 lakh tons valued at about Rs 15,000 crores.

The international market is abuzz with speculation about India’s import volumes. A trader in Canada told Business Line in confidence that many traders including some in Singapore, Dubai and USA are positioning themselves by buying up whatever yellow pea and red lentil is available from Canada. They expect India to buy up everything. In any case, most suppliers perceive India as residual market that will absorb whatever is offered.

The emergence of shortage is already reflected in market prices. After languishing for well over a year at about Rs 2,400 a quintal, chana prices have spurted steadily in the last three months and currently stand at over Rs 3600 a quintal, that is an increase of 50 percent. It may soon test Rs 4,000 a quintal.

In the last two years, pulses had no significant contribution to food inflation. If anything, chana prices ruled well below the minimum support price for an extended period of time. The government failed to provide support to growers through intervention despite a strong case and many representations. The negative fallout is now visible in the chana acreage that has badly slipped. Now, with lower production and rising prices, pulses will once contribute to food inflation.

Already India’s per capita availability of pulses is low at about 14 kilograms and the poor actually consume perhaps just half of the national average. With rising prices, there will be further decline in pulses consumption by the poor, the most in need of protein.

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