Agri commodities under bear grip, will the fall continue?

Anand Rathi Commodities

Rabi sowing has geared up in the last one month and the lag in the sown area reduced substantially. Almost 81 percent of the normal rabi crop area has been covered by December 21. However, this is still 4.5 percent lower compared to the same period last year.

Mustard seed is the only winter crop that has registered higher area under cultivation in the ongoing 2018-19 rabi season.

Oil crops were among the most affected segments last week mainly due to higher supplies and bright prospects of rabi oilseeds. The largest mustard growing state of Rajasthan reported 12.6 percent higher sowing in 2018-19 season and weather conditions too remain favourable so far in the producing belt.

Ravindra Rao

Head - Commodity Research & Advisory|Anand Rathi Commodities

• Here's why some commodities could bounce back during Christmas week

• Turmeric prices on the rise: Is the sudden spurt sustainable?

• Cotton production estimates for FY19 slashed further; prices to go up

Moreover, supplies of other oilseeds, particularly soybean, too remain adequate as farmers are releasing their produce to reap the benefit of the procurement scheme. Accordingly, overall oilseed complex plunged during the last week. The outlook for mustard seed continues to be bearish, provided weather remain conducive during the crucial growth phase.

Among spices, fall in coriander was due to release of stocks at higher price levels, whereas jeera and turmeric declined ahead of the upcoming harvest season.

Coriander prices have witnessed substantial gains in the first half of the month on concerns over lower acreage. In Gujarat, the second largest coriander growing state, sowing was just 30 percent of the normal by December 17. That makes it 58 percent lower compared to the same period last year. Thus, coriander prices are bound to go up on concerns over lower acreage.

Cotton prices declined in the last one week as global cotton markets tumbled, heading for its longest run of losses in a month. India’s export prospect is not only dependent on domestic availability but also on the international cotton prices, as the nation competes with the US and Brazil in the cotton trade.

The outlook for international cotton prices is bearish in the near to short-term but may turn positive January onwards once US supplies start declining.

In the domestic markets, prices have plunged below MSP in many states and thus government procurement will gather pace. Bargain buying might emerge at lower levels, as domestic shortage persists.

Chana was also the victim of the recent fall and prices fell below the support price of Rs 4,400. Around 99 percent of the normal sown area has been covered under chana by the last week and is reported at 89.36 lakh hectares. However, sowing is 9 percent lower compared to the same period last year.

Karnataka crop is almost ready for harvesting whereas in Maharashtra harvesting will commence in mid- January followed by Madhya Pradesh in February and Rajasthan in March. In the short term, the outlook may turn positive for chana on lower sown area. However, a sharp upside will be capped considering the upcoming harvest.

The author is Head - Commodity Research & Advisory at Anand Rathi Commodities.