Pulses ride up and down

Import curbs and festival season demand will support prices amidst excess supply

Within a gap of just 18 months, the prices of major pulses categories have witnessed their peak and trough. The latest WPI inflation data of July’17 shows a fall of 32.56 per cent (YoY) in the overall prices of pulses. Currently, majority of the pulses, especially tur, moong and urad, still trade below their minimum support prices despite imposition of import curbs.

Excess supply

The significant hikes in MSP (on an average of 15 per cent in the last two years), coupled with favourable monsoon and promise of increased procurement support, provided the necessary stimulus to produce an output of 22.5 million tonnes (mt) in 2016-17 compared to 17.1 mt in 2014-15. In 2015-16, the output of pulses declined to 16.35 mt due to back-to-back droughts and delay in announcement of support measures.

Another contributing factor leading to the supply glut was the ‘continued policy of duty-free imports’ until recently when the government finally imposed quantitative restrictions on the imports of tur, moong and urad.

As a result of zero-duty imports without any limit, India is estimated to cross 6 mt of pulses import in FY17 (compared to 5.7 mt in FY 16) on top of the highest ever domestic pulses production in FY17. Along with the slower response on curbing imports, the suspension of futures trading and demonetisation further reduced demand at a time when the domestic market was flooded with excess supply. India banned the export of pulses in 2006, and that ban still continues except for the export of kabuli chana and 50,000 tonnes of organic pulses and lentils/annum.

Even the decision on lifting of stockholding limits for pulses (barring chana) came too late in May’17 by which time the ‘record harvest-induced forced sale of pulses by farmers was already over.

The current scenario

As per the government’s data, the acreage of pulses in 2017-18 till August 18 fell by 3.5 per cent to 13.07 million hectares as a result of reduced farmer preference for pulses cultivation due to lower realisations, together with weak and uneven rains in the key producing States.

The government didn’t in fact even expect 13-plus million hectares under pulses this year. But, because of equally low expected returns from other competing crops like soyabean and maize, the acreage under pulses was better.

However, high temperature during the sowing period and erratic rainfall are likely to reduce the yield of pulses by at least 10 per cent in 2017-18 and will help in providing the firm undertone.

Moreover, quantitative restrictions on imports of tur (200,000 tonnes), moong and urad (300,000 tonnes) along with relisting of Chana futures contract in July’17, build-up of festival season demand, possibility of calibrated opening of pulses exports and the expectation of the continued procurement support will aid positive sentiment.

However, the government’s decision to sell pulses out of its buffer stock of 1.9 million tonnes at a lower price of ₹40/per kg compared to its purchase price of ₹50-55 per kg is likely to have a moderating effect on the market prices.

The writer is vice-president and head of Agriculture, Food, and Retail at Biznomics Consulting

Read the rest of this article by Signing up for Portfolio.It's completely free!

What You'll Get





MORE FROM BUSINESSLINE


 Getting recommendations just for you...
This article is closed for comments.
Please Email the Editor