Chana bullish on limited supplies, expensive imports

The rally in chana prices starts in the beginning of sowing season last October. This season, chana prices have surged about 40 per cent to currently trade at Rs 4,800 per quintal. Current price levels are seen for the first time in three years on expected lower production and higher imports. Earlier in the season, during Oct-Dec, prices surge more than 27.5 per cent from Rs 2,900 per quintal to Rs 3700 levels on reports of lower sowing progress, weak monsoon and expectation of imposition of import duty. However, it remains quite stable at Rs 3,500 levels in January and March on expectation of new crop arrivals. Meanwhile, extending duty-free chana imports also helped in keeping cap on prices. Price Volatility and Surge Chana prices started to surge again in the last week of March after the Ministry of Agriculture have officially reported large-scale crop damage of chana in Rajasthan and Madhya Pradesh due to unseasonal rains and hailstorm. The chana futures on National Commodity & Derivative Exchange (NCDEX) surged up about 34 per cent to Rs 4,885 per quintal from Rs. 3,638 levels in April - May, similarly, the spot price also increases by almost same rate to Rs. 4,800 levels from Rs 3,586 levels. However, prices slipped 10.4 per cent to Rs 4,300 levels in the first three weeks of June on imposition of stock limits by certain state governments and advance in dates for staggered delivery by NCDEX. Moreover, early monsoon rains during June and reports on floating of import tenders for chana by the government agencies from Australia and other countries helped in cooling down the prices. Chana prices moved up again in July to Rs 4,700 levels as government exempted stock limits for all the warehouses registered with Warehouse Development and Regulatory Authority and forecast of weak monsoon during the second half of monsoon season by

Indian Meteorological Department (Aug-Sep). Lower Production estimates Chana production is estimated at 71.7 lakh tonnes (lt) in fourth advanced estimate release in August by Department of Agriculture & Cooperation (DAC) is less by 4.2 lt estimated in third estimate in May. The recent estimate for chana production is lowest in six years i.e. since 2008-09. However, according to trade sources the production may not have reached 50 lt, considering unseasonal rainfall has damaged the crop and reduced yield. Earlier, Indian Pulses and Grains Association's (IPGA) pulses survey has estimated chana production of about 55.6 lt, lower by 15 per cent compared to last year production. Lesser arrivals and stocks In the current season, arrivals of chana in major producing states recorded substantially lower compared to last year. As per Agmarknet data, arrivals in top chana producing state, Madhya Pradesh, recorded at 1.8 lt, between March and July, lower by over 58 per cent compared to 4.3 lt recorded in the corresponding period last year. Similarly, arrivals in Rajasthan and Maharashtra recorded lower by 67 per cent and 40 per cent respectively. Moreover, in the Exchange warehouse, the stocks are diminishing faster during the current month. As on 21st Aug, stocks of chana in NCDEX warehouse decreased by about 18 per cent to 1.09 lakh tonnes compared to stocks at the beginning of August. High Imports India imported about 4.9 lakh tonnes (lt) of chana in 2014-15, an increase of 51.8 per cent compared to the quantity imported in 2013-14. Total import of chana in 2013-14 stood at 2.76 lakh tonnes. However, according to Department of Commerce, the country imported more than 1 lt of chana in the first two months of 2015-16 marketing season. According to trader sources, the chana prices in key importing countries like Australia and Canada increased due to anticipation of strong import demand from India. The prices of chana from Australia raise more than $100 in past one a month, to above $700 per tonnes. Outlook Chana prices are likely to firm up in coming months on short supply and expensive imports likely from Australia and Canada. Further, deficient monsoon forecast and

pickup in festive demand may surge up prices to Rs 5,000 levels during October as demands will be fulfilled by imports until new crop arrives in March next year.

Disclaimer: The above opinion is that of Mr. Naveen Mathur, Associate Director - Commodities & Currencies, Angel Commodities Broking Pvt. Ltd. & is for reference only.

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