Rabi crop prices likely to decide course of ongoing farm protest

As the farmers’ agitation at Delhi’s borders enters its fourth month, prices farmers get in the forthcoming rabi harvest could determine their future course of action. A sharp dip in prices could further fan discontent.

Wheat, mustard, and chana are the main crops that will be harvested in the next few weeks. All of these are majorly grown in the hotbeds of the agitation — Punjab, Haryana, Rajasthan, parts of Uttar Pradesh, and Madhya Pradesh. In case of wheat, which is the biggest cereal grown in the rabi season, as a bulk of the produce in these parts is procured by state agencies at a pre-fixed minimum support price (MSP), the extent and speed with which the government moves with its procurement operations will determine how prices behave.

With farmers taking to the streets and a bumper crop expected, it is unlikely that there will be any let up in wheat procurement in the 2021-22 marketing season.

According to the central government’s latest estimates, wheat has been sown in around 34.63 million hectares this year, around three per cent more than the corresponding period last year. The Centre has fixed the MSP of wheat for the 2021-22 marketing season (April to March) at Rs 1,975 per quintal.

In the current marketing year, the Centre procured around 39 million tonnes (mt) of wheat, with Punjab and Madhya Pradesh contributing nearly 13 mt each.

However, experts and market watchers are divided on the movement of the prices of mustard and chana. While most believe prices of mustard could rule above the MSP of Rs 4,650 per quintal, in the case of chana, the view is that much will depend on how the Centre intervenes in the market to stabilise prices and ensure a steady return to growers.

“As far as mustard is concerned, at present its prices are ruling high because of good domestic demand and also bullishness in overall oilseed complex. A reason also why the carry forward stocks going into the new season that will begin in full force from March 15 is expected to be just around 0.2-0.4 mt as against the normal 0.5-0.8 mt. Though there might be some drop in prices, they won’t fall sharply as demand continues to be robust,” BV Mehta, executive director of Solvent Extractors Association (SEA) of India, told Business Standard.

Mehta expects mustard seed prices to stay at over Rs 5,000 per quintal. “In several areas mustard oil is seeing a renewed demand as it is considered to be a good immunity booster against Covid, which will also help in keeping prices high,” he observed. In 2020-21 rabi season, around 7.5-7.7 MT of mustard seed was crushed by oil mills. Mustard production, according to industry estimates, in the next season is expected to be around 9 MT.

In case of chana, which is the biggest pulse grown in the country, traders said despite a slight expected drop in production due to near absence of post monsoon showers in the key states of Madhya Pradesh, Rajasthan, Maharashtra, and Gujarat, prices could struggle to conveniently breach the MSP of Rs 5,100 per quintal by a big margin, unless there is strong government procurement.

“If the Centre procures at least 1.5-1.7 mt of chana to stabilise the markets, then we can see prices hovering around the MSP mark,” said Sanjay Periwal, managing director, S P Meditors, a commodities trading firm and member of Indian Pulses and Grains Association. Trade estimates had pegged chana production in 2019-20 at 8 mt, much lower than the government estimates of 11.50 mt.

Prerana Desai, associate director and head of research at Edelweiss Agri Value Chain, said unless there is a global collapse prices of mustard will stay supported, while in case of chana prices might stay close to the MSP and not much below that as government is expected to actively intervene to prevent any crash in view of the farmers’ unrest. 

“That apart, in case of chana, farmers too might not be eager to sell below the MSP,” Desai said.

Meanwhile, Bimal Kothari, vice-chairman of IPGA, feels that once harvest starts there might be some pressure on chana and there could be correction from the current levels, but won’t stay down for long as prices of all other pulses are ruling much above their respective MSPs.

“March, April, and May are also the peak consumption months for chana and, therefore, harvest time. Prices aren’t expected to drop sharply and could move in a 5-7 per cent range below and above the MSP as it is the cheapest pulse available,” Kothari said.