Harvesting of rabi crops is nearing completion and arrivals in mandis have peaked. Although unseasonal rains in February-end and early March delayed harvest this year, it picked up pace in the later part of March. While seasonal supply has put pressure on prices of most rabi crops, particularly chana, mustard and wheat, a further downside seems limited, considering the cyclical price patterns of these crops.
Seasonal price patterns Agricultural commodities tend to follow seasonal price patterns that are linked to growing and harvesting seasons. While deciding on the price trend, one should not miss out this significant feature of price determination.
According to the seasonality pattern, prices are usually at their bottom during the harvesting season due to supply pressure.
On the other hand, prices normally bottom out when arrivals peak and gradually start rising. However, in the years of surplus or deficit production, the price behaviour deviates from the normal course. In case of vast divergence of actual from expected supplies caused by vagaries of weather, these factors can have a distinct impact on seasonal price patterns.
As far as chana is concerned, sowing of this pulse crop takes place during October-December, while harvesting is done in January and continues till May. Accordingly, chana prices decline from February onwards and bottom out in May when arrivals from Madhya Pradesh and Rajasthan reach their peak.
In the current scenario, the Government has estimated record chana output at 92 lakh tonnes this season to June, in the second advance estimates released in February 2014.
However, the unseasonal rains damaged some crop in Madhya Pradesh, Rajasthan and Maharashtra. But the extent of the loss is not huge; and thus output projections might be pruned. Supply side scenario looks normal for chana and we expect bottom fishing opportunity during mid-May once supplies start declining.
Wheat, mustard In the case of wheat, harvesting takes place during March-May and prices generally start moving southwards from February onwards. The Government starts procuring wheat from farmers at minimum support price in April, and consequently prices bottom during this period.
However, in the current season, wheat prices have moved against seasonality due to a host of factors. Since the beginning of the year, exporters have placed forward contracts for March-April-May delivery ahead of the wheat crop arrival from Russia, Ukraine, America and Australia.
Moreover, in February, domestic wheat prices were well supported by unseasonal rains in Rajasthan and parts of Gujarat which raised fears over delay in harvesting.
Added to this was the Ukraine-Russia crisis and mounting concerns over the health of the US winter-wheat crop.
With some correction in prices in March and early April, the north-ward journey in wheat remains intact. Price trend over the medium-term will remain positive, considering the strong domestic demand from private traders and millers.
As far as mustard is concerned, February-March is the peak arrival period, and therefore price of this oilseed generally remains under pressure in these two months. But in the current season, heavy rains affected harvesting and the moisture level increased substantially.
Prices remained at elevated levels even in February. With weather becoming clearer after mid-March across major growing belts in Rajasthan and Madhya Pradesh, prices declined sharply thereafter.
Going forward, a downside trend in mustard seems to be limited with the yield of the standing crop being poor; arrival pressure will start diminishing early this season in the case of mustard seed.
At the current juncture, seasonality pattern points towards a gradual recovery for most rabi crops.
However, it is of prime importance to study these patterns, along with other important indicators affecting that particular commodity, as seasonal cycles alone may sometime misread the trend.
(The author is the Associate Director of Commodities & Currencies at Angel Commodities Broking)