Cash starved farmers have started selling groundnut in distress to improve upon liquidity and enable them repay borrowers' dues in time to maintain their credibility for future.
Farmers in major groundnut producing states including Gujarat, Andhra Pradesh, Rajasthan and Karnataka brought additional area under groundnut sowing this kharif season resulting into a sharp increase this year in its output. A survey conducted by the apex industry body the Indian Oilseeds and Produce Export Promotion Council (IOPEPC), showed India's groundnut output at 6.69 million tonnes for 2016, an increase of 29 per cent from the 5.19 million tonnes reported in the previous year.
Groundnut seed kernel price averaged at Rs 4,367 a quintal in November 2015. This year, however, groundnut prices have crashed to trade sharply below the minimum support price (MSP) of Rs 4,220 a quintal and benchmark variety trading at Rs 3,725 a quintal.
Demonetisation has worsened as farmers are still not prepared to bank transfers. Farmers are pressed upon to open a bank account for electronic fund transfer, which has paralysed the trading system.
"Farmers have no option but to sell in distress in absence of as government agencies are not active for procurement despite price falling below MSP," said B V Mehta, Executive Director of the premier industry body the Solvent Extractors' Association of India (SEA).
National Agricultural Cooperative Marketing Federation of India (Nafed) and Bharatiya Kisan Sangh Gujarat Pradesh (Gujarat Sangh) have started procurement of groundnut at MSP in some mandis in Gujarat, but in smaller quantity and hence not impacting prices.
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However, Atul Chaturvedi, Chief Executive Officer of Adani Wilmar Ltd, the producer of Fortune brand edible oil is optimistic as he said, "Probably, the worst is over. We have urged the government to allow exports of groundnut oil which would not be more than 50,000 - 60,000 tonnes per annum and make no difference on India's edible oil sector. At the same time, however, it would support groundnut prices for higher realisation for farmers.
Currently, export of groundnut oil is permitted in consumer packs upto 5 kgs only but industry wants permission to export in bulk, which will help rebalance prices.
"Demonetisation brought entire agricultural sector to standstill initially. But, business has resumed in a few mandis with farmers bringing in their produce for sale. Groundnut prices have recovered from their recent lows," said Sanjiv Sawla, Director, M Lakhamsi & Co, a city based groundnut trader.
Given that the agro climatic condition is favourable for rabi season also, SEA estimates another 1.5 million tonnes of groundnut output this year.