1. Chana prices reel under pressure

Chana prices reel under pressure

Chana, the only pulse trading on the futures platform, is showing below rates with respect to the spot prices.

By: | Published: December 30, 2017 1:00 AM
chana, chana prices, pressure, pulses prices Chana, the only pulse trading on the futures platform, is showing below rates with respect to the spot prices. (Reuters)

Even though the government has taken a number of steps to reign in the sliding prices of pulses, agriculture experts claim these prices are a mere manifestation of the demand and supply situation prevailing in the country. Chana, the only pulse trading on the futures platform, is showing below rates with respect to the spot prices. Explaining the recent price movement in chana coinciding with the release of the NICR report on chana, G Chandrashekar, a commodity expert, says, “Due to high acreage and favourable weather so far, India is all set to reap record chana crop this year. And so prices today in spot market are reflecting only to these fundamentals. Therefore, it is absolutely necessary for the policymakers to take affirmative action. The best to begin with is price support and procurement operations or at least some firm signals in that direction. No one can beat the market fundamentals.” Chana, being the single pulse in the group on exchange platform, has also witnessed a fall in its futures prices in tandem with its spot prices in line with other pulses. Even though some stakeholders in trade circles have voiced their concern over the role of futures trade in falling prices of Chana, the evidential proofs doesn’t support it, senior officials at NCDEX said. The futures price for the near month (October 17 expiry contract) on 3rd of October was Rs 5,432 and the far month contract (March 18 expiry) was trading at Rs 4,723, while the spot price was approximately Rs 5,464. This trend continued and on close of 27th December, chana futures as the near month futures (January 17 expiry contract) was trading at Rs 3,960 and far month contract (May 2018 expiry) was trading at Rs 3,910, respectively vis-à-vis spot price of Rs 4,069. This clearly shows the market was expecting the prices to fall in coming days owing to higher anticipated supplies and hence future prices was and continues to trade at discount to spot prices, NCDEX officials pointed out. “One of the many reasons for the recent price fall of chana, according to me, is that our farmer’s planting decisions are based on last year’s prices rather than expected prices at the time of harvest. Rather than looking backward, we need to make forward looking future based prices while taking a planting decision. The planting decision should be based on futures prices which will ensure lower uncertainty. It is time to think afresh and resurrect Indian agri-futures for farmer’s benefit,” said Ashok Gulati, chair professor for agriculture at Indian Council for Research on International Economic Relations (ICRIER) and former chairman of the Commission for Agricultural Costs and Prices (CACP).
With the price fall of chana by around 20% since October 2017 and subsequent lesser profitability, a difficult situation is being seen among the farmers. Contrary to the claims made by some vested interests, the chana futures contract at NCDEX platform, could act as a potent instrument to prevent producers from adverse price fluctuation risk and help them in locking their profits through hedging their produce, said Samir Shah, MD&CEO, NCDEX. He said many FPOs (farmer producer organisations) have already shown how farmers could see benefits using the future platform. “Bundi based FPO Srijan in Rajasthan is a case in point which has traded large quantities of mustard and soyabean in futures and got remarkable profits for its farmer members with respect to those who used traditional methods to sell their produce. Likewise, Ram Rahim FPO in Bagli near Indore and Aaranyak in Purnea, Bihar are also living examples of farmers increasingly using NCDEX platform to mitigate their price risk through hedging,” he said. The recent re-launching of chana futures on the NCDEX platform provided benchmark prices to the industry, he said. According to the NICR report, past two years have exhibited quite a lot of volatility in the pulses segment. The monsoon deficit of the years 2014 and 2015 resulted in short supply of pulses, which in turn led to a sharp rise in the prices. Higher prices prompted farmers to dedicate significant area to pulses production during 2016 which, due to favourable monsoons, resulted in excess pulse production. The resultant output of all these factors created a supply glut at a larger level and adversely affected the pulse prices including chana. This is a reason why major kharif pulse crops such as tur, urad and moong are also trading below the MSP. The annualised price volatility since July 2017 has been 31% for chana, while it has been 44% for tur, 53% for urad, 66% for moong. The mandi prices of most pulses are trading far below the MSP these days, although some recovery in these pulse prices is seen due to slew of government measures taken during past couple of months, Shah pointed out. However, various market fundamentals playing up are the reason why chana prices have continued to reel under pressure, despite the government’s efforts. Higher stock in central pool, import flow and bumper crop last year, improved production prospects during current year and increased mandi arrivals during October and November months comparative to previous months seemed to have impacted domestic market sentiments, he said, adding that this has created a great opportunity to initiate a conversation around hedging, amongst the farmer communities. The market regulator Securities and Exchange Board of India (Sebi) lifted the ban on futures trading in chana (gram) around mid-July this year, to ensure better price realisation for farmers, as the country had achieved record production in the 2016-17 crop year. India witnessed record pulses production of 22.95 million tonnes during 2016-17 (highest ever production since independence), which included 9.3 million tonnes of chana.

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