Pulses market bottoms out decisively

But burdensome inventory levels are easing

After two successive years of record harvests, burgeoning inventory, unchecked imports (until the second half of 2017) and crashing farm-gate prices, much to the chagrin of growers, the domestic pulses market is, of late, showing some welcome signs of life.

Prices of various pulses have begun to rise from their depressing lows, and are currently ruling at, or above, the psychological ₹4,000-a-quintal mark, although still below the minimum support price (MSP).

From their previous depressed levels, pigeon pea (tur) rates have moved more than 15 per cent to around ₹4,050, although still well below the MSP of ₹5,450 (2017-18) and even farther from the ₹5,675-a-quintal MSP for 2018-19. Lentils have moved by ₹300 to a little over ₹4,000, although still below the MSP of ₹4,250.

The only pulse futures contract to be traded on an exchange —chana — is an exception. Chana futures are currently trading at about ₹4,600 a quintal, clearly signalling the expectation of market participants in the months ahead. While the MSP for chana is ₹4,400 a quintal (2017-18), the spot prices recently breached the MSP to trade at ₹4,500 a quintal. There is further upside.

It may not be a big turnaround, but portends are clear. The domestic pulses market has bottomed out. Very clearly, across pulses, the burdensome inventory levels are easing. This has been triggered by restrictions on imports (quantitative and tariff) over the past year, as well as expanded consumption during the just-concluded festival season.

Overstated numbers

Another important reason for the price performance is the rapidly emerging view in trade circles that the Centre’s acreage and production numbers are overstated. There is huge scepticism over the 2018-19 kharif harvest estimate of 9.2 million tonnes, and specifically the pigeon pea output estimate of 4.1 million tonnes.

Given the unsatisfactory distribution of South-West monsoon, precipitation yields are believed to be below average in the ongoing kharif season.

Similarly, chana crop of 2017-18, estimated at 11.2 million tonnes, also faces the same perception of being overstated by about a fifth. Without doubt, market is the final arbiter, and no one can talk the market up or down anymore.

So, what’s the outlook for the pulses market? There is no case, as of now, for a bull run in pulses. With the exception of chana, pulse prices are most unlikely to go near their respective MSP anytime soon.

But as prices rise, most stakeholders should feel relieved, if not happy. For growers, it is a positive signal that the worst is over. The government’s burden of procurement may ease to some extent, while consumers are not worse off.

As the inventory with public agencies such as NAFED (National Agricultural Cooperative Marketing Federation of India) —– estimated at about 4.0 million tonnes, including 2.5 million tonnes of chana and 1.0 million tonnes of tur/arhar —– is gradually unloaded into the market, it will help contain any undue price rise in the weeks ahead.

Poor consumption

A major weakness of the government’s pulse sector policies is the failure to boost consumption demand.

Given the poor nutrition status of the population, it is logical and rational to expect policymakers to pursue programmes to boost consumption. Such an approach would have saved the government the blushes, helped growers obtain better prices, and helped advance nutrition security; unfortunately, that has not happened.

The rabi crop conditions are not ideal. Large parts of important States such as Madhya Pradesh and Uttar Pradesh have poor subsoil moisture.

This can potentially impact pulses cultivation, especially chana and masoor (lentil). The preliminary area coverage report as of November 9 is far from flattering — down some 1.5 million hectares from the 5.4 million ha this time last year. Chana acreage is slipping badly. There is risk the trend will hold.

Equally critical is to recognise the looming risk of El Nino from December onwards, which can curtail the much needed winter rains.

The author is a policy commentator and a global agribusiness specialist

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