How agri commodities fared

Most agri commodities faced rough weather in 2017, with oversupply pushing prices down to below the minimum support price (MSP).

The crashing of prices of major agri commodities in the country led to farmer agitations on a wide scale, including a few violent protests. But some corrective action from the government and expectation of reduced crop supplies in the new season provided support to prices.

The Dhaanya index, a value weighted index computed in real time using the prices of the 10 most liquid commodity futures traded on NCDEX platform, which lost 11 per cent in value by June, has recovered modestly since, making a 9 per cent gain till December 15.

Here’s a look at what changed for major agri commodities in 2017:

Oil crops were one of the most affected. The prices of soyabean, mustard and groundnut declined in the 20-30 per cent range (year-on-year) from their peaks in 2017, shows SEA data.

Soyabean, the country’s top oilseed crop, traded in the range of ₹2,600-2,800/quintal (MSP at ₹2,850/quintal) for much of the year due to cheaper imports and easy availability of cheaper substitutes. To tame the slide in prices, the government substantially hiked import duties on edible oils on November 17. This provided some support to soyabean.

Meanwhile, lower price realisation led to reduced acreage in the new season, tempering the slide in prices (given expectation of lower output, going forward).

In pulses, market prices have been ruling way below the MSP for the last many months due to record high imports and substantially higher domestic supplies. Despite the government’s measures (though delayed), such as hikes in import duties, imposition of quantity limits, lifting of stock limits and removal of ban on exports of pulses, prices continued to decline.

The price falls in the case of tur, moong, urad and masoor were steeper than in chana — the only traded pulse on the exchange, which was re-listed in July after a year-long gap.

Record-high wheat production in 2017 influenced the government to double the import tax on wheat (20 per cent) to rein in imports and support domestic prices. But since the move came late and stockpiles had risen by then, wheat prices dropped — from a high of ₹2,150/quintal in November 2016 to ₹1,600/quintal levels in December 2017.

Cotton posted a good start for the year on delayed arrivals, followed by sharp corrections on expectation of ample supply from India and the rest of the world. In the last month, prices have jumped sharply due to concerns over pink bollworm and whitefly attack and the announcement of bonus by Gujarat over and above the hikes in the MSP.

However, the current situation shows that the crop loss may be compensated by increased acreage and keep the market adequately supplied. Also, the high level of export commitment from the US, and the procurement support from the government in the wake of the poll setback in Gujarat’s cotton areas will not let the prices fall significantly.

When it comes to spices, jeera futures touched a record high (₹22,360/quintal) in December’17 on account of low stocks, robust export and domestic demand. Overseas buyers are now focusing on Indian markets for imports as Syria and Turkey stocks are almost exhausted. However, a 50 per cent expansion in the acreage till mid-December may bring sharp corrections in prices.

Coriander, on the other hand, witnessed a decline of over 31 per cent since the start of 2017 due to excess supply and average demand. However, prices started receiving support after the news of lower sowing (down by 30 per cent) from the last week of November. The next two months will be crucial for these two spices to determine their crop quality and yield.

The price behaviour of agri commodities in 2018 will largely depend on the weather and climatic conditions in the next two months. Government policies will also play a crucial role on the eve of the 2019 parliamentary election.

The writer is vice-president and head of agriculture, food, and retail at Biznomics Consulting