Demand buoys groundnut by 49%

Low availability and strong demand for groundnut in the country has led to a 49 per cent rise in prices compared to last year, traders said.

They expect a further rise of Rs 1,000-2,000 a tonne in the coming month although a rally beyond these prices is ruled out as rates have already appreciated sharply in the recent past.

"Availability of groundnut has been poor due to low production this year, while demand is strong from crushers and farmers," said Umesh Mantri, an Akola-based groundnut trader.

As of June 22, groundnut was quoted at Rs 29,500 a tonne compared to an average of Rs 19,794 in June last year. The total area under groundnut in India during the current season ending June is seen at 5.8 million hectares compared to 6.7 million hectares the previous year, while production is pegged at 5.4 million tonnes, down 13.6 per cent from a year ago, according to the Central Organisation for Oil Industry and Trade.

"Shift in groundnut acreage to cotton in Gujarat and low yields have adversely impacted groundnut production," said Govindbhai Patel, managing director of the Gujarat-based Dipak Enterprises.

In Gujarat, the major producing state, groundnut acreage has fallen by 100,000-150,000 hectares in 2006-07 from the 1.87 million hectares sown in the state the previous year, said Patel.

Demand is also on the higher side with farmers from Andhra Pradesh and Karnataka gobbling up stocks from Maharashtra for sowing, said Mantri. "With the month of shravan starting August, demand for the nuts will rise, while the new crop is expected only in November," he said. Shravan is the fifth month of the Hindu calendar and is spread out with innumerable religious festivals and ceremonies.

Stockists are the only ones who have inventories as of now and will not sell if prices fall, according to traders.

Low production of groundnut has also reduced the availability of oil, leading to a sharp surge in prices of the commodity. On June 22, groundnut oil was quoted at Rs 70,500 a tonne compared to an average of Rs 48,360 in June last year.

Trade estimates peg groundnut oil availability in the country for 2006-07 at 740,000 tonnes, down 25 per cent from the previous year.