Most agri commodities up on rupee depreciation

Almost all agri commodities jumped in futures trade on the National Commodity & Derivatives Exchange (NCDEX) on Monday, following Britain's exit from the European Union (Brexit), which weighed on the dollar against major global currencies, including the Indian rupee.

While global referenciable agri commodities moved up following similar trend in global markets, edible commodities basket followed suit due to their import to become costlier post fall in the rupee. Chana for example, for delivery in July hit the upper circuit to close at Rs 7335 a quintal. In fact despite suspension of new futures contract in chana, in spot market as per NCDEX data Delhi chana closed all time high of Rs.7685 per quintal. According to a broker, chana prices at this high was unheard of and futures suspension has not helped controlling chana prices. When Sebi suspended new contracts in chana on 17 June, its price was Rs.6970 in futures.  Most spices were also up as traders and stockists see a profit making opportunity in this complex. India exports a major quantity of spices largely to the Middle East and Europe.

Analysts, however, believe that a number of traders adjusted their positions in agri complex in the future markets to cover up the need of margins call from non-agri segment. Non-agri commodities witnessed a sharp volatility in the last two days since the result of the United Kingdom referendum was announced, with voters opting out of European Union.

"Although agri commodities might have their own reasons for price rise, yet their close association with no-agri helped them firm up in futures market. In fact, sudden upsurge in non-agri commodities triggered margin call, resulting into traders adjusting their positions in agri commodities accordingly," said Ajay Kedia, Managing Director, Kedia Commodity Research.

Following wider move, cotton price jumped in physical markets to hit a two-year high. In June, cotton price jumped by over 10% due to supply shortage, following excessive exports and thereafter a sharp fall in the actual output this year. As against the actual output of around 31 lakh bales (1 bale = 170 kgs), the Cotton Advisory Board (CAB) in the beginning of the harvesting season had estimated 35 lakh bales.

A city-based veteran cotton trader Arun Sakseria forecast India's fibre import at 1.7 million bales by the end of this season ie: September 2016.

"Agri commodities in India would face a long-term impact of Brexit. But in the immediate term, agri commodities in India are insulated from international factors in general, hence, they had a limited impact. In sectors where India trades with the world markets either in the form of import or export, would have an impact to the tune of currency fluctuations," said Jayant Manglik, President (Retail Distribution), Religare Securities.

Meanwhile, the rupee depreciated to close at 67.96 against the dollar on Monday as against 67.25 on Friday. The depreciation in the rupee would make imported goods like pulses, edible oils, cotton, etc., in agri segment costlier.

Of the total estimated pulses consumption of around 23.5 million tonne, India meets around 5.5 million tonne through imports. Similarly, total vegetable oil import into India is estimated at 15.5 million tonne in the current oil year ending October 2016, which stands at around two-third of India's annual consumption.