Agricultural commodities harvested in winter, including soybean and castor seed, hit the lower circuit in futures trade on commodity exchanges, on hopes of a bumper crop this season and cues from global markets.
On the National Commodity & Derivatives Exchange (NCDEX), both soybean and castor seed contracts for delivery in October fell four per cent each to Rs 2,951 a quintal and Rs 3,284 a quintal, respectively. Potato contracts for delivery in October on the Multi Commodity Exchange (MCX) fell four per cent to Rs 903.50 a quintal.
Harvesting of summer sown crop has begun, with estimates of a record output, especially for the soybean crop, the largest in the oilseed basket. The revival in the monsoon rains in early August raised hopes of a better kharif crop, compared to previous estimates.
|FALLING STREAK (Rs/quintal)|
|Commodity||Delivery month||Closing price||Change (%)|
|Crude palm oil*@||October||407.2||(-)4|
|Source : NCDEX, * MCX, @ price per 10 kg, # price per kg|
“A sharp revival in the monsoon in August has not only favoured kharif crop output, but also raised prospects of rabi sowing. Thus, prices of many agricultural commodities have plunged significantly from their record high levels in July. With harvesting gaining pace in the domestic, as well as global markets, primarily for oilseeds, the entire edible oil pack has come under the grip of bears,” said Naveen Mathur, associate director, Angel Broking.
Despite delay in sowing, the rise in yield is expected to increase this year’s soybean output eight per cent. Soybean production is estimated at an all-time high of 12.68 million tonnes (mt) this kharif harvesting season, compared with 11.65 mt in the previous year.
“The new season crop has started hitting the market…India is heading for a record soybean crop this season, despite delay in planting in the beginning of the sowing season. Scattered rainfalls, along with a recovery later in the season, helped farmers recover early loss in acreage,” said Rajesh Agarwal, Soybean Processors Association of India spokesperson.
While the benchmark Dhaanya agri index on NCDEX recorded a fall of 0.45 per cent, the MCX agri index, the MCXAGRI, fell 2.82 per cent to settle at 2,109.45 in early evening trade.
Far-month contracts, too, the lower circuit. This meant agricultural commodities in India were heading for a severe downward move, said an analyst.
For castor seed, potato and other crops, the revival in monsoon rains aided a steady recovery in crop acreage. With a positive yield sentiment, the overall output of the kharif sowing crops is estimated to be higher than earlier estimates.
Mathur said higher output estimates for domestic soybean, the record pace of soybean harvesting in the US and higher stocks of Malaysian palm oil exerted pressure on prices.
Indranil Sen Gupta, India Economist of DSP Merrill Lynch (India) foresees a drastic decline in rural farm income this year, owing to the deficient and delayed rainfall. “It is not as if rural discretionary spending will collapse. Still, the push from rural India that drove consumption is fading away for now.” He estimates kharif farm income to fall to 5.5 per cent this year from 12.4 per cent in 2011 and 37.7 per cent in 2010, owing to rainfall deficiency.