Futures prices fell 5-12% in December; trend may continue next year.
Agri commodities prices eased in futures and spot markets due to higher rabi output expectations, more than the compensating figures for kharif losses. Prices of entire agri complex declined between 5 and 12 per cent in December which, analysts believe, is the beginning and may continue throughout next year.
The decline in agri commodities’ prices, despite shortage, has provided the much awaited respite to the government as the move will help bring down inflation, which is currently at over 19 per cent.
| DROP DOWN Price (in Rs/quintal) | ||
| Commodities | Dec 1 | Dec 29 |
| Wheat (F) | 1394 | 1323 |
| Rice | 3400 | 3200 |
| Tur | 8000 | 7200 |
| Urad dal | 7200 | 6500 |
| Urad | 5300 | 4800 |
| Sugar M30 | 3700 | 3600 |
| Sugar S30 | 3600 | 3500 |
| Chana (F) | 2731 | 2482 |
| Chilli (F) | 5895 | 5520 |
| Cuminseed | 16699 | 14309 |
| Guarseed | 2890 | 2737 |
| Castorseed | 3088 | 2830 |
| F = Futures | ||
Earlier, the government estimated prices of agri commodities to decline with the harvesting of winter crop as acreage during the rabi sowing shot up sharply, covering the uncovered area of kharif season. The area under cultivation for rabi crops increased 1 per cent due to a rise in area under major rabi crops such as wheat, rapeseed, mustard and gram dal.
The acreage under wheat rose by 5 per cent to 137 lakh hectares till November 26, which is higher than the 130 lakh hectares in the comparable period last year. Rapeseed, mustard and gram dal have recorded an increase of 3 per cent and 1 per cent, respectively, in the area under cultivation. The true picture of rabi output will be clear only by January-end.
Meanwhile, the government revised the kharif rice output estimate upwards to 71.65 million tonnes, higher by 2.2 million tonnes from the previous estimates. Analysts argued that the drought in the beginning of the kharif sowing this season was different than the typical droughts which causes damage to the crop.
The shortfall in the kharif foodgrain production, projected earlier at over 21 million tonnes, is now projected at 18.7 million tonnes.
According to Madam Sabnavis, Chief Economist of the National Commodity and Derivatives Exchange (NCDEX), “Agri price inflation so far has been caused by a combination of two forces — lower production and low base year effect. Generally, prices of kharif crops tend to ease during October-January when the crop comes in and the week-on-week inflation eases. Therefore, what we are seeing today is lower price inflation in some food products on account of crop arrival.”
Sabnavis, however, added that it may be debatable whether the decline in prices of certain products can be interpreted as a victory over inflation as price levels are still higher than last year — which is important.
Meanwhile, finding no takers for wheat at record high price of Rs 1,500 a quintal, the food minister Sharad Pawar last week announced to cut prices by Rs 200 a quintal before the new crop arrived.
Since the new crop size is estimated at 80 million tonnes, little over 78 million tonnes last year, prices are expected to ease further with the harvesting of new crop by early March, said Amol Tilak, an analyst with Kotak Commodity Services.
“Sugar is likely to remain in deficit this year. But, the actual production is expected to remain higher than last year’s figure at 14.7 million tonnes. It is premature to forecast prices of sweetener today for this season as total production is still unknown. Analysts forecast output to be at 16 million tonnes but, we feel it to go up further,” said Rajendra Shah, partner, Hitendra Kumar Thakarshi & Co, a Vashi-based sugar trader.
