With the monsoon rainfall forecast to remain below normal this year, the prices of agricultural commodities have started rising. Dhanya, an agri index representing almost all majorly traded commodities on the National Commodity & Derivatives Exchange (NCDEX) has risen 2.3 per cent since Monday, when the India Meteorological Department (IMD) forecast this year’s rain would be five per cent below the long-term average.
The agri index, which closed at 1,131.71 on Monday, shot up to 1,158.08 two days later. Today, however, it fell a marginal 0.3 per cent, to close the day at 1,154.66. Dhanya represents chana, chili, cotton seed, oilcake, guar seed, jeera, potato, pepper, mustard seed, refined soya oil and sugar (grade) M.
“This is an initial reaction. People do not require to press the panic button, as the forecast by the IMD is based on atmospheric conditions which may or may not come true. Even if the prediction proves true, it does not indicate failure of crop, as much would depend upon the quantum of rainfall and its distribution in July,” said Madan Sabanavis, chief economist, Care Ratings.
Agri commodities also recorded a spike in the spot market, with sugar M-30 traded at Rs 2,691-2,831 per quintal today, from yesterday’s close between Rs 2,661-2,811 per qtl. Sugar S-30 also firmed up to trade between Rs 2,626-2,666 per qtl, as compared to Rs 2,601-2,651 per qtl the previous day.
In Nagpur, major pulses closed with a marginal increase, with tur quoted between Rs 2,300-2,710 per qtl today, as against Rs 2,300-2,665 per qtl yesterday.
‘Too early’
“The current price rise is a sentimental boost, which is bound to revert when people understand it was an initial forecast. Even the Sensex zoomed on June 20 on the monsoon news but reverted the following day,” Sabnavis added. “All crops are now sown in the kharif season only. The revival in monsoon rainfall later is likely to benefit the northeastern states, where the rainfall has been deficient so far.”
The department of agriculture has estimated on June 20 a slight increase in the paddy sowing area this kharif season. Paddy has been sown on 1.035 million hectares (mha) till date, as compared to 1.032 mha last year. The sugarcane sowing area has risen four per cent to 5.09 mha as against 4.87 mha last year. The area under cotton so far has increased 40 per cent to 2.16 mha, compared to 1.54 mha last year.
The area under oilseeds is up almost 16 per cent to 347,000 ha till date, against 300,000 ha in the year-ago period. Pulses have been sown in 286,000 ha so far, about 5,000 ha more than last year. An area of 847,000 ha has been covered under the cultivation of jute and mesta so far, as compared to 778,000 ha last year. The actual scenario will emerge with the progress of the monsoon in July, a crucial period for rainfed crops. Hence, the five per cent below-monsoon forecast by the IMD does not matter much at this point. Assessing the impact of deficient rainfall today is too early, said D K Joshi, chief economist at Crisil Rating.
Last year, IMD had forecast a normal monsoon at the beginning. Later, actual rainfall was recorded above normal, resulting in higher agri output.
