Some minor commodities with regional production and global user presence have offered extraordinary profits during the last financial year.
Guar seed, a cattle feed, with its derivative, guar gum, performed the best among all commodities traded largely in mandis and online exchanges during the last crop year, on lower output estimates. Investment in guar gum and guar seed offered a profit of 953.7 per cent and 884.6 per cent, respectively, during 2011-12.
Mentha oil (118.3 per cent) and pepper (59.4 per cent) are other examples, on rising regional and global demand. The worst performers were chilli, turmeric and cotton, with prices dropping 30-60 per cent during the financial year.
However, despite the spectacular rise in commodities such as the ones mentioned, few traders benefit -- smaller investors keep away from trading and the market size of these is also not so big.
For commodities whose prices did not show such a good result, there may be a negative impact on sowing and overall output. While, sowing of the small commodities mentioned should go up this year. Usually, farmers sow more of commodities giving the highest return. As a consequence, both acreage and production of the commodity increase, resulting in a sharp fall in prices the next season.
“A lot, however, will depend on what are the minimum support prices (MSPs) being announced by the government. Rice and wheat tend to be preferred by farmers, as they are assured a buyer and price. They will probably not deviate from this path, though pulses like tur and urad or oilseeds like soya or groundnut would have fetched higher prices in FY12. It is only at the margin that farmers may shift to these crops, expecting higher returns,” said Madan Sabnavis, chief economist, CARE Ratings.
According to a report by Kedia Commodity, guar seed output during this season was estimated at 1.209 million tonnes, as compared to 1.5 mt during the earlier ones. With lower output, demand for guar gum, used in a number of industries such as oil drilling, textiles, paper and pharmaceuticals, grew multi-fold. India is the only supplier of guar gum in the world, with overall export rising 194 per cent to 670,000 tonnes during April-November 2011.
Another factor for the rising prices of minor commodities is ongoing fundamentals. Despite rising consumption on widening user horizon, production has remained almost stable for several years. A lack of high-yielding seeds, coupled with frequent change in climatic condition, has hampered farmers initiatives to increase overall output.
In fact, for pulses, coarse grains and oilseeds, there is a slight decline in production. As there are no stocks maintained in these commodities, any shortage gets reflected in higher prices. In fact, as we import 50-55 per cent of edible oils and around 20 per cent of the pulses’ requirement, the impact on prices tends to be distinct. This adds to the pressure put by increase in MSP, of around 10 per cent yearly.
| AGRI COMMODITIES GAIN MOST Price movement of various futures and spot contracts traded on various exchanges: | ||||||
| Name | Price in Rs/qtl | % chg | ||||
| Exchange | Mar, 2010 | Mar, 2011 | Mar, 2012 | 2010-11 | 2011-12 | |
| Guar gum Jodhpur | NCDEX | 4,720.90 | 8,421.90 | 88,740.00 | 78.4 | 953.68 |
| Guarseed Bikaner | NCDEX | 2,280.00 | 2,762.50 | 27,200.00 | 21.16 | 884.62 |
| Pepper-Kochi | NCDEX | 14,800.45 | 24,142.85 | 38,494.45 | 63.12 | 59.44 |
| Groundnut Bikaner (Rs/20kg) | NCDEX | 2,842.20 | 3,085.70 | 4,811.60 | 8.57 | 55.93 |
| Chana Indore | NCDEX | 2,141.25 | 2,290.00 | 3,433.75 | 6.95 | 49.95 |
| Mustardseed Jaipur (Rs/20kg) | NCDEX | 504.95 | 2,568.50 | 3,755.80 | 408.66 | 46.23 |
| Soy Bean Indore | NCDEX | 2,029.00 | 2,308.00 | 2,993.00 | 13.75 | 29.68 |
| Chilli Guntur | NCDEX | 4,873.00 | 7,970.85 | 5,202.15 | 63.57 | -34.74 |
| Turmeric Nizamabad | MCX | 11,372.00 | 10,225.00 | 3,795.00 | -10.09 | -62.89 |
| Menthol Oil Chandaus (Rs/kg) | MCX | 668.5 | 1,203.00 | 2,625.50 | 79.96 | 118.25 |
| Potato Agra | MCX | 572.5 | 637.2 | 886.3 | 11.3 | 39.09 |
| Gold Ahmedabad (Rs/10g) | MCX | 16,300.00 | 20,760.00 | 28,075.00 | 27.36 | 35.24 |
| Silver Ahmedabad (Rs/kg) | MCX | 26,875.00 | 55,900.00 | 55,950.00 | 108 | 0.09 |
| Platinum Mumbai (Rs/gm) | MCX | 2,349.50 | 2,553.50 | 2,677.00 | 8.68 | 4.84 |
| Copper($/tonne) | LME | 7,830.00 | 9,399.50 | 8,480.00 | 20.04 | -9.78 |
| Gold ($/ounce) | LME | 1,113.25 | 1,432.30 | 1,668.35 | 28.66 | 16.48 |
| Silver *( $/ounce) | LME | 17.48 | 37.67 | 32.27 | 115.47 | -14.32 |
| Brent Crude ($/Bbl) | Global | 81.3 | 117.25 | 123.81 | 44.22 | 5.59 |
| Cotton($/lb) | ICE | 80.55 | 200.23 | 93.52 | 148.58 | -53.29 |
| Data Compiled by Bs Research Bureau | ||||||
Farmers have already started responding favourably to the price rise in mentha oil. Almost 50 per cent of mentha planting is complete. According to trade sources, farmers are encouraged at the 118 per cent return of last year. Hence, overall sowing area is expected to increase this year by at least 20 per cent, with output to surpass last year’s 36,000 tonnes.
“Overall change in sowing pattern would depend upon farmers’ usability of the futures platform, based on overall awareness,” said Tanushree Majumdar, chief economist with the National Commodity & Derivatives Exchange.
