Even as wholesale prices of most pulses like tur/arhar, urad and moong cooled in the last two months following record kharif harvest, the country’s biggest pulse crop chana (gram or desi chickpea) harvested in rabi season (March/April 2016) is still quoting at record rates (around ₹9,500 a quintal) in the physical market, notwithstanding the suspension of futures trading in mid-June this year when prices were testing ₹7,000 a quintal (100-kg lot).

If anything, after the suspension of derivative trade, chana prices spurted even higher to over ₹11,000 a quintal, demonstrating the futility of suspending such trade in the commodity.

To be fair, the regulator had justified the decision on the ground of ‘abundant caution’ but it was of little help.

The enormity of price escalation is stark when compared with the minimum support price (MSP) of ₹3,500 a quintal (including bonus) announced by the government for 2015-16.

So, what went wrong?

The genesis goes back to the 2013-14 rabi season when chana production peaked at 9.5 million tonnes and farm-gate rates crashed 20 per cent below the MSP of ₹3,000 a quintal. The government failed to intervene in the market. There was no support measure to arrest falling prices through, for instance, procurement.

Frustrated growers moved away from chana in the following rabi season (2014-15) and the planted acreage plunged two million hectares.

It was worsened by unseasonal rains and hailstorm at harvest time as a result of which production declined to 7.3 million tonnes. An opening stock of about 0.7 million tonnes saved the situation and kept prices somewhat under check.

The following year 2015-16 was even worse with harvest of 7.2 million tonnes and no opening stock.

In other words, chana faced two back-to-back setbacks in production — rabi 2015 and 2016 with a total output loss of 4.5 million tonnes. Imports filled only a third of the void – 4,20,000 tonnes in fiscal 2014-15 and 10.1 million tonnes in 2015-16.

The ‘dal shock’ has been in the making for the last two years, but policy makers paid little attention to the fundamentals.

Fortuitously, a huge rebound in kharif 2016-17 pulses crop (under the lead of tur/arhar or pigeon pea) combined with record crop of peas and lentils in major exporting countries such as Canada, the US and Australia has put tremendous downward price pressure on most pulses. For instance, pigeon pea rates have collapsed from around $1,100 a tonne six months ago to the current level of $600 a tonne. Rates of India’s favourite yellow pea (a close substitute to chana) have plummeted to $300 a tonne from $380 a tonne.

The emerging scenario is clear. With the festival season behind us, demand has peaked. Yellow peas from Canada, Russia and Ukraine as also new chickpea crop from Australia have begun to arrive on Indian shores.

India will see import of about 1.5 million tonnes of yellow pea from November to January. It will ease the tightness and augment availability. Australian chickpeas are offered at around $850 a tonne, that is less than ₹6,000 a quintal.

Planting of rabi pulses — mainly chana — has begun after the kharif harvest and is set to gather pace.

Given the record-high open market prices, chana acreage is most likely to show a rebound. The production target for chana is 9.6 million tonnes. Soil moisture conditions are favourable. There is strong likelihood of a supply response to prices.

Outlook

By mid-December, one can reasonably expect a large correction in chana prices. From the current levels, a decline to the extent of 30 per cent is likely in the next four-six weeks. At the time of going to press, the government had not announced MSP for 2016-17 rabi crops.

The biggest suspense is whether unseasonal rains will recur during chana harvest time in 2017. Watch this space.

The writer is a global commodity specialist

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