Agri commodity futures fall on forecasts of a normal monsoon

Agri commodity futures fall on forecasts of a normal monsoon

Last Updated: Mon, Apr 29, 2013 20:40 hrs

Water splashes image via Shutterstock
Agricultural commodities futures have moderated, following forecasts of a normal monsoon this year. The NCDEX Dhaanya index fell 2.5 per cent since reports of a normal monsoon started coming in.

Initially, a private agency had forecast a normal monsoon for this year. Last week, the India Meteorological Department (IMD), agreed with this estimate. It predicted during the four-month southwest monsoon this year, rains would be 98 per cent of the long-period average (LPA). Rainfall of 96-104 per cent of the LPA is considered normal.

IMD also said rains in interior parts of peninsular India, including the drought-hit areas in Maharashtra and Gujarat, would be normal. (Click fro table)

"IMD's predictions came not just as a surprise but also as a relief for everyone reeling under high inflation. Over the last few weeks, we saw most agri rates tumbling in the spot and futures markets," said an analyst with Religare Commodities.

Following the monsoon forecasts, the NCDEX Dhaanya index fell from 2,421 points as on April 19 to 2,360 today. Turmeric, chana, jeera and chili were among the major losers. Potato and cotton futures have also moderated. While the Forward Markets Commission imposed an additional margin for potatoes, cotton prices fell after a decline in cotton prices in the US.

"IMD has not issued any riders or risks such as possibilities of the El Niño or the La Niña; therefore, this is really good news," said Madan Sabnavis, chief economist, CARE Ratings.

However, considering the erratic nature of the monsoon in recent years, anything could happen. "Yet, the early signals are positive, not just for the agricultural sector, but for the economy as a whole," said a Religare analyst.

Last year, rains were below normal; some states had recorded a drought. This had resulted in delayed sowing and low yields of many crops.

In 2012-13, the agricultural sector grew just 1.8 per cent, owing to low rains. This affected economic growth and resulted in double-digit inflation. With petrol and diesel prices on the rise, prices of agricultural commodities have also risen. A good sowing season for kharif crops could result in higher production of foodgrain and pulses and lead to a fall in prices in the near term.

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