Prices of nearly all agricultural commodities took a beating on the futures market on Wednesday. The bearish trend is likely to continue for some more time, potentially putting a spanner in the government’s plan to double farmers’ income.
Coriander and turmeric dropped 4 per cent while jeera declined 3.66 per cent and castor seed 3.87 per cent on commodity exchange NCDEX platform (see table).
Among others, soymeal fell by 2.88 per cent, soybean 1.99 per cent, guar seed 2.26 per cent and kharif maize 2.09 per cent. A similar trend was visible in prices of these commodities in the spot market.
Coincidentally, urban development minister M Venkaiah Naidu met agriculture minister Radha Mohan Singh at the latter’s residence and sought government procurement of red chillies in Andhra Pradesh and Telengana as farmers are agitated over the fall in market prices.
Singh said: “Under the market intervention scheme (MIS), we are providing Rs 5,000/qtl support to chilli growers in the states, and additional Rs 1,250/qtl for packaging.”
The farmers’ distress over dip in prices of agricultural produces is not confined to one or two states, but is spread across the country.
“The price fall in agriculture commodities is mainly driven by the Indian Meteorological Department’s (IMD) prediction of a normal monsoon. Most commodities, including turmeric and coriander, have hit the lower circuit while guar and jeera have fallen despite their strong fundamentals,” said Ajitesh Mullick, assistant vice president, retail research, Religare Commodities. In subsequent predictions, if IMD predicts an above normal or early monsoon, a further crash in commodities is expected, he said. “This will mainly affect kharif crops, but the bearish sentiments in the agriculture market will affect other commodities as well,” he added.
The next update of monsoon forecast in June will be crucial for the commodity markets.
There is no reason why prices should crash so drastically when the demand for food is on a rising curve due to population growth, said food policy expert Vijay Sardana, who also termed the current fall as a short-term trend.
“Where a large population is under-fed and malnourished, the drop-in prices of essential commodities like wheat and pulses are not a good sign. To ensure minimum health of every citizen, India needs 20 million tonnes of additional food every year for the growing population. But the supply is not increasing as per demand and prices are also crashing. This is a serious issue,” Mullick said.
Production of foodgrain, including rice, wheat and pulses, is likely to be a record 271.98 million tonnes in the 2016-17 crop year ending June, according to the agriculture ministry data released in February.
Wheat, rice, pulses, coarse cereals and oilseed production are all set to surpass the previous record. The ministry is likely to release an upward revision of the harvest data this month.
“The transition from an informal to formal economy also has an impact as it has curbed speculative activities to a large extent,” said an expert.
prabhudatta.m@mydigitalfc.com