Supply crunch fuels pulses' rates

Speculation and cartelisation have lifted prices of urad, chana and tur since December.

Retail prices of most pulses are over Rs 60 per kilogram from Rs 35-40 a kg last year due to a tight demand-supply situation. Traders allege that prices are going up because of speculation in domestic commodity exchanges.

"Prices of most pulses, especially urad, chana and tur have witnessed spurt since December, especially due to speculation and cartelisation on futures," said a trader with a Mumbai-based brokerage.

Further, "the price rise is not just on futures but also in spot market. This has a lot to do with minimal clarity in market and lack of information," said Amar Singh, analyst for agro commodities with Delhi-based Religare Securities.

In urad, as contracts traded on exchanges accept only Myanmar origin delivery, there is too much of speculation.

The Burmese urad contracts on NCDEX and MCX have an annual volume of 4 lakh tonne when the actual imports are just about 1.5-1.8 lakh tonne. India produces about 12-14 lakh tonne urad annually but it is not traded on domestic exchanges.

To sort out this big anomaly, the regulator has asked the exchanges to work on changing contract design in a bid to remove the narrowness in contract specifications and inclusion of more varieties, a FMC official said.

"In December-January period, there was speculation over a fall in Myanmar crop which pulled up prices. This led to a decline in imports by 30 per cent," said a Mumbai-based import intermediary. As futures started souring, exporters raised their quotes thereby, resulting in lower import orders.

On retail front, the rising prices have hit demand by about 20 per cent. While market players expected this to be an unusual spurt and eyed a reversal, the situation has continued since March. Delayed purchases by millers has resulted in lower inventories, thereby fuelling a further price rise, in spot and futures.

"Mill buying is down 50 per cent. Bullish trend on futures hit spot arrivals and has led prices to rise. Prior to futures, the usual change in prices was Rs 10-20 per 100 kilograms but on futures, an intra-day change of Rs 200 happens often," said Ajay Khandelwal of Indore-based Khandelwal Pulse Mill.

With signs of strong demand in India, international prices are also firm. At present, urad of FAQ variety is quoted at $ 660 a tonne compared with $525 a tonne in January, chana at $485 a tonne compared with $365 a tonne in January and lemon tur at $350 a tonne versus $250 a tonne in January.

"Burmese quotations on the higher side as more imports expected in the short term. Burmese imports of lower quality at lower prices continue to hit the markets. Stockists hoarding goods with a view to increase prices," said Singh.

In chana, price spurt has been since March as unseasonal rains in Rajasthan and Madhya Pradesh adversely affected the crop yield and outer husk of deliverable quality. This has fueled speculation about the tight supply of deliverable quality on the exchanges, and thus, the spiralling prices.

Abnormal increase in chana prices was mainly due to speculative activities as physical demand remains low. Strong demand from Pakistan is expected for this and next year and this likely to keep prices up.

Further, there are reports of restricted selling from growers and rise in stockists' hoarding. In tur, hoarding prevails and demand low following high prices.

On Saturday, NCDEX May urad contract ended at Rs 3272 per 100 kg compared with Rs 3,323 from previous close and Rs 2271 on January 2.

NCDEX May chana contract ended at Rs 2,500 per 100 kg compared with Rs 2,536 from previous close and Rs 1,678 on January 10. NCDEX May lemon tur contract ended at Rs 1,911 per 100 kg compared with Rs 1,963 from previous close and Rs 1,621 on January 10.

Annually, domestic pulses consumption is estimated at 12-13 million tonne with a similar amount being produced locally. Imports and exports of various pulses like urad and chana take place on demand-supply situation.

In 2005-06, urad imports are estimated at 1.5 lakh tonne and exports seen minimal.

Chana imports are estimated at 1 lakh tonne and exports at 60,000 tonne. Lemon tur imports are likely at 1-2 lakh tonne.