Mixed outlook for agro commodities after unprecedented rainfall hits major parts of India
Date:08-26-2019
The strong revival of the southwest monsoon since late July is good news for the rabi crop. However, unprecedented heavy rains in parts of central and north India have raised worries about the yield and quality of Kharif-grown commodities, including soybean, groundnut, moong, urad and rice.
With the harvest season for short-duration Kharif pulses now approaching and just a month left for oilseed harvesting, the potential for higher prices will be capped.
Meanwhile, the Japanese national forecaster retained its outlook of a reasonably rainy September for India, followed by a productive North-East monsoon (October-December) for the southern peninsula.
Thus, a temporary spike in Kharif-grown commodities, particularly soybean, cotton, rice, urad and moong in the immediate term is likely due to concerns about crop damage. The short-to-medium-term trend, however, would be bearish.
Erratic weather has turned turmeric, a long-duration crop, pale. Flooded Sangli, a leading turmeric hub, has washed away supplies, while bone-dry weather in Marathwada, the major growing belt in Maharashtra, has heightened concerns regarding yield. The new turmeric crop arriving at markets is still four months away. Thus, there is much headroom for prices to pluck up.
The good rains forecast for September may leave the soil adequately moist for rabi crops, including chana, mustard seed, wheat, jeera and coriander, boosting prospects of sowing. Prices of these commodities are now lower; hence hold potential.
Demand-side fundamentals of chana are strong amid the fast-approaching festival season. Thus, we expect chana to turn positive in the short term.
Demand from millers for mustard seed is sturdy. Crushing was around 17 percent more in July than in the corresponding period last year. The good demand is primarily to meet mustard-meal export commitments, which rose 19 percent in July.
Supplies of wheat by private traders have fallen greatly and the government agencies are releasing wheat at the higher prices fixed under the open-market-sale scheme. Thus, an upward trend may be seen in wheat in the short to medium term.
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