Pulses market now in equilibrium stage

G Chandrashekhar | Updated on October 28, 2020

Beleaguered growers to receive much-needed relief

Breaking a 30-month long bearish trend, the price of various pulses in the domestic market has started to rise in the last three months, bringing much-needed relief to the country’s beleaguered growers.

The burdensome inventory of domestic and imported pulses has eased considerably following welcome policy interventions on the demand and supply sides, including free ration of chana (desi chickpea) to vulnerable families amid Covid-19 lockdown and highly restrictive imports of other pulses.

This has brought the supply-demand fundamentals to a state of near-equilibrium. The market prices of most pulses (including chana /gram and tur / arhar (pigeon pea), which together account for roughly 65 per cent of total production, have moved above the specified minimum support price (MSP) reflecting a return to balanced market conditions.

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Compared to the MSP of ₹4,875 a quintal, chana (chickpea or gram) is trading at ₹5,200-5,300 a quintal. It is necessary to recognise that with the drying up of yellow pea import (following quantity and duty imposts) demand to the extent of 1.5 million tonnes of yellow pea has moved to chana.

At ₹7,000-8,000, tur / arhar too is trading well above the MSP of ₹6,000 a quintal, while urad is available at ₹6,800-7,500 levels depending on quality and location. While there usually is a tendency to build inventory in a rising market, consumption demand growth is tepid, given the dire economic conditions.

At 9.3 million tonnes (ml t), the government’s first advance estimate of pulses production for kharif season 2020-21 is seen as overstated by 7-8 per cent. The actual crop size is likely to be 8.5-8.7 ml t. With prices trending above MSP, the need for price support is minimal. However, to ensure that the market stays within the comfort zone of the government (and consumers), it may be necessary to augment supplies by gradually liquidating public stocks with state agencies.

The rise in prices of pulses coming at the time of kharif harvest is a good augury for the season ahead. This is sure to encourage growers for the rabi season planting that will gather pace in the weeks ahead. Barring weather aberrations, the prospect for a satisfactory rabi season harvest of pulses – mainly chana – appear bright.

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That alone should help rein in any undue price rise. In addition to kharif arrivals, the market would be tracking the progress of planting for the upcoming season. On current reckoning, it appears unlikely that chana prices would decisively breach the ₹6,000 a quintal mark and stay there.

Should that happen, the import gates will open. Overseas suppliers are waiting in the wings. There is no restriction on chana import, except customs duty of 60 per cent. Any offer at $500 a tonne will result in import parity.

Not only pulses, soybean prices too have risen to around ₹4,300 a quintal, well above the MSP of ₹3,880. Apparently, the government’s production estimate of 13.6 ml t is substantially above the trade estimate. Rise in global soybean price too is exerting its impact on India via the soybean oil import route. Good for growers.

(The writer is a policy commentator and agribusiness specialist. Views are personal)

Published on October 28, 2020

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