Potato has suddenly become a hot favourite for commodity traders on futures platforms. Along with prices, open interest (OI) has gone up tremendously since the beginning of this year which indicates that traders see potential in potato contracts going forward.
Potato price has almost doubled since the beginning of this year to trade on Tuesday between Rs 7-9 a kg in the Vashi Agricultural produce market committee (APMC) market. The price, however, stagnated in this range in the last 7-10 days on supply shortage from major producing centres like Agra in Uttar Pradesh and Tarkeshwar in West Bengal.
Potato price for delivery in April 2012 on the National Commodity & Derivatives Exchange (NCDEX) also doubled to close on Tuesday at Rs 1072.9 a quintal as compared to Rs 590.30 a quintal on January 3.
In futures also the near month contract shot up similarly which a section of traders term as speculative trading.
"Potato futures have been trading higher than spot prices, and this is merely due to speculation that has been doing the rounds. Due to this spot prices are also expected to move up in the coming days," said Sanjeev Mittal, an Agra based potato trader.
But, others like Ashok Valunj, director of APMC, Vashi, feel that fundamentals also remained supportive for the commodity to move upwards.
“Potato prices are going up due 15-20% fall in production estimates. Arrivals too remained inadequate in major mandies,” said Valunj.
Against the normal arrival of 90-100 trucks (of 14 tonnes), only 70 trucks reported unloading on Tuesday due to less availability of trucks in Uttar Pradesh. According to a large Mumbai-based trader: “There was election mood in Uttar Pradesh during the last week which coincided with Holi celebration across the country. Hence, very few trucks were available for potato transport which resulted into lower availability in major consuming mandies including Vashi.”
Traders sudden attraction towards potato can be gauged from the fact that Open Interest has increased significantly in the last few weeks on the Multi Commodity Exchange (MCX). The near month contract for Tarkeshwar delivery on the MCX has recorded a total OI of a staggering 41.70 tonnes on March 5 which gradually plunged to 19.50 tonnes on March 12 from a mere beginning of 1.5 tonnes on March 3.
On the NCDEX also, traders traded 333 lots of potato worth Rs 3 crore on March 3 which shot up to 1761 lots valued Rs 27.23 crore on March 12. The exchange recorded a staggering surge in OI at 9870 lots on March 13 as compared to a mere 795 lots on January 3.
After National Horticultural Research and Development Foundation (NHRDF), a public sector agri research agency, also estimated a marginal decline in output this year, the crop was severely damaged by disease.
NHRDF estimated overall potato output at 40 million tonnes in 2012-13 as compared to 43.6 million tonnes in the previous year. Against that, trade forecast total output to decline at 36 million tonnes on late blight disease. At this level of production, the country will have no surplus potato for this season as the output matches with overall estimated consumption in India.
According to a trader, nearly 25% of the current season’s output has already hit the cold storages which is unlikely to be released in near future. Stockists generally prefer to release holdover stocks in lean season for higher realisation.
Whatever the factual scenario might be, the commodity has joined the rally of other commodities like guar gum, seed, pepper and mentha oil that have recorded over 200% increase in the last one year.
A report by Angel Commodities says that potato prices have already factored in the impact of 10-15% decline in output. Hence, the prices are likely to consolidate or may even start declining, the report added.
