Commodity Analysis

Problematic times for pulses

G Chandrashekhar | Updated on January 15, 2018 Published on March 26, 2017

PO27_pulses

PO27_calculator

Rebound in production alongside large-scale imports to keep prices under pressure

In a strange development, at a time when India is harvesting a record pulse crop estimated at 22.1 million tonnes (kharif 8.7 million tonnes and rabi 13.4 million tonnes), Indian imports are also set to reach a new high of over 6.0 million tonnes (mt) during financial year 2016-17.

From April 2016 to January 2017, total arrivals of imported pulses were an estimated 5.4 mt; and going by the frenetic pace of arrivals to beat the March 31 proposed deadline to ensure cargoes are fumigated with methyl bromide at the origin rather than at the discharge port in India, the projected import for the whole year is set to exceed the 2015-16 high of 5.9 mt by about 10 per cent.

In other words, the aggregate availability of pulses in India (domestic production plus import) is a massive 28 million tonnes this year. Admittedly, Indian crop production data is compiled on a crop year basis (October-September), while imports are on a financial year basis. But that is not going to dramatically alter the availability picture.

On the ground, the impact of a big rebound in production combined with continuing largescale import is that farm-gate prices are ruling closer to the minimum support price for most pulses.

The tardy pace of procurement through the designated government agencies further exacerbates the downside price effect in many producing centres.

In 2016-17, growers planted record acreage in the hope of receiving remunerative prices after two years of below-normal rainfall and subdued harvests.

The collapse in the price of major pulses such as pigeon pea (tur/arhar) and chickpea (chana) in recent months is sure to belie the hopes of the growers and disillusion them. Policymakers have to guard against the risk of a decline in acreage in 2017-18 as a backlash to lack of adequate support in this year.

Outlook

So, what’s in store for the pulses market in the coming months? Chickpea or chana is the country’s dominant pulse crop accounting for 40-50 per cent of aggregate pulse output. Harvest is on and the arrival of chana is slowly gathering momentum.

The government’s estimate of chana harvest is 9.1 mt although some sceptics say the crop size could be slightly lower at about 8.5 mt.

Currently chana prices are hovering in the ₹4,800-5,000/quintal region and the market is likely to come under pressure in the coming weeks when arrivals turn heavy. Australian chickpea imports (priced at an average of $800 a tonne) are also continuing. About 5,00,000 tonnes have been contracted for.

Tur: At about ₹4,300 a quintal, tur/arhar (pigeon pea) prices continue to rule below the MSP of ₹5,050 a quintal. If import duty is imposed, it will support the domestic market and help improve tur/arhar prices by 10 per cent to reach close to MSP.

Urad: At about ₹6,200 a quintal, urad price is well above MSP. Import duty, if levied, will lift urad price too.

Uncertainty in the air

Currently, there are two uncertainties for the market. One is the possibility of the government imposing an import duty (may be 10 per cent) on pulses so as to discourage large-scale imports that are seen depressing domestic prices.

The other is the non-tariff barrier in the form of compulsory methyl bromide fumigation at the origin (load port) instead of at destination (discharge port in India).

Countries like Canada and the US have banned methyl bromide fumigation; and so they will not be able to comply with Indian plant quarantine condition.

While this move by the government has created panic in the market, there are attempts to find a via media in the form of use of fumigant aluminium phosphide or phosphine as an alternative to methyl bromide. By its very nature, phosphine reacts slowly taking several days to exert its effect, unlike the rapidly acting methyl bromide.

Another key uncertainty for the market (both domestic and international) is also the early sign of a developing El Nino in South-East Asia. It may take up to two months to obtain a credible forecast of the status of the weather phenomenon.

By then, the government of India will have to be ready with an action plan to meet any contingency.

Otherwise, the euphoria of record crops may vanish without a trace.

The writer is an agribusiness and commodities market specialist

Published on March 26, 2017

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Sincerely,

Support Quality Journalism
null
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.