After the announcement of the India-US interim trade deal, market prices for several commodities, including cotton, soyabean and maize have fallen below their respective minimum support prices (MSP), according to traders.
The prospect of a surge in imports of these items from the US suggests the market expects supplies to increase significantly over the next few weeks. The sudden fall in their prices coincided with generally subdued prices for rabi crops, such as wheat, mustard and chana, due to healthy harvests and high trade stocks.
Market prices are currently 3-9% below the benchmark MSP rates. The low prices may hit farmers’ income adversely in a market where the terms of trade is usually tilted against them, analysts said.
As for individual commodities, prices of long staple cotton prices are currently ruling around Rs 7,200/quintal, as against the MSP of Rs 8,110/quintal. Immediately after the announcement of the India-US trade deal, the price of the key natural fibre across Maharashtra dropped to Rs 6,700/quintal, before recovering moderately.
Tariff Ripple Effect
“After the announcement of trade deal, market prices of soyabean declined by at least Rs 500 – Rs 800 quintal for soyabean. Thers are apprehensions that these agri-commodities would be imported in large quantities under zero tariffs,” Anil Ghanwat, Maharashtra-based farmer leader and president, Swatantra Bharat Party, told FE. Prices of several commodities have declined because of lack of clarity on the trade deal, he added.
As per the joint statement on an “interim” bilateral trade agreement released by India and the US recently, New Delhi agreed to grant greater market access to the US via elimination or reduction of tariffs for a clutch of American farm produce including Distiller’s Dried Grains with Solubles (DDGS), soyabean oil, red sorghum for animal feed, tree nuts, fresh and processed fruits, wine and spirits, and “additional products.” A subsequent factsheet issued by the US included cotton and “certain pulses” in the items India will cut tariffs on, but later it excluded pulses from the list. The draft of the interim trade pact calls for reduction in duties or duty-free import of extra-long staple cotton.
Cottton traders and oilseed producers are expecting more clarity on the exact nature and scope of the duty concessions. Experts feel that in the case of these items, tariff concessions may be subject to quotas (tariff rate quota).
Currently, India imports only up to 2,00,000 tonnes of soyabean oil from the US, which is only 5% of total imports of the commodity. The product attracts a 16.5% duty on crude edible oils, including a 10% basic customs duty, 5% agri-cess and 1.5% education cess. Cotton imports from the US nearly doubled in 2025 compared to the previous year.
The US is expected to bring down reciprocal tariffs on India to 18% from 25% this week and the chief negotiator from the Indian side will travel to the US next week to finalise the legal text of the interim pact, Commerce Secretary Rajesh Agrawal said on Monday. With this, the tariff cuts by India will also take effect.
The Tamil Nadu farmers Association has petitioned the Centre for procurement of maize, noting that market prices were ruling lower than MSP.
Perfect Storm
With the early harvest arriving in the market, prices of chana (gram), which has a 50% share in the country’s pulses production, is ruling 9% below the benchmark. Robust imports of Bengal gram and yellow peas, a variant of gram, has caused a decline in prices at the beginning of the harvesting season.
“Robust imports as well as expectation of bumper output would ensure that at the peak of the winter crops arrivals prices are expected to rule 10% to 15% below the MSP if the government does not step up purchases,” Satish Upadhyay, secretary, India Pulses and Grains Association, said.
While the harvesting of mustard has commenced in a few pockets across Rajasthan and Madhya Pradesh, its prices are also ruling a tad below the MSP of Rs 6,200/quintal. “There is a prospect of a bumper harvest which may pull down mustard prices at the peak of arrival next month,” Roop Singh, CEO, Uttan Mustard Producers Company, a farmer producer organisation based in Astavan village of Bharatpur, Rajasthan, said.
Mandi prices of wheat, too, are currently ruling Rs 100 – Rs 150/quintal below the MSP of Rs 2,585/quintal. “The state government should refrain from announcing bonus over the MSP as the centre has announced a significant rise in MSP for the next market season starting from April,” Gagan Gupta, a trader from Sehore, one of the biggest markets in Madhya Pradesh, said.