Agri commodities decline on higher acreage, favourable monsoon

Total area sown till June 26 stood at 16.56 million hectares, up by a staggering 23% from the same time last year

Prices of agri commodities declined by upto 14% so far this month on prospects of bumper output this kharif season following better than forecast monsoon rainfalls and higher acreage.

While soybean price fell by 14% to trade at Rs 3444 a quintal in Indore mandi, chana slumped by 13% to Rs 4162 a quintal in New Delhi market. Jeera prices in Unjha (Gujarat) slipped by 11% to Rs 16035 a quintal. Others commodities also followed suit.

As per latest sowing data released by the Ministry of Agriculture, total area sown till June 26 stood at 16.56 million hectares, up by a staggering 23% from the same time last year. Kharif crop sowing picked up during last week following spread of rainfalls. While pulses sowing moved up by 80%, cereals and oilseeds sowing rose by 15% and 427% respectively.

Following the deficient monsoon rainfalls forecast by the Indian Meteorological Department (IMD) first at 93% of long period average (LPA) in April, agri commodities started firming up. Commodities moved up further on downward revision in the rainfall at 88%.

"Commodities markets had rallied too much in anticipation of deficient monsoon rainfalls. So, they are correcting now since the monsoon rainfalls remained favourable which revived sowing of kharif crop and battered prospects of agri production," said Ajay Kedia, managing director of Kedia Commodity, a city based commodity trading firm.

Meanwhile, private weather forecasting agency Skymet reported 88% of cultivable area India observed normal or excess rains in June. From June 1 to June 25, central India was surplus by 55%, while northwest was surplus with 27%. In peninsular India, rainfalls were surplus by 30%, observed Skymet.

Till now rain God is favorable to India with above normal. Indian farmers' dependency on monsoon rain is high so the variation in crop acreage and production varies with the rainfall. This year there is chance of El-Nino projected by the IMD and other global agency.

"Our scenario analysis suggests, the coarse cereals like bajra, jowar, rice are highly impacted with the rain as they are mainly sown in the rain fed area while edible oilseeds, pulses, sugar and cotton can be sown in irrigated land, less impacted with the El-Nino/ lesser monsoon. We believe pulses acreage could remain higher amid better prices while cotton and sugar sown in irrigated land but lower prices in last year discourage the farmer from sowing. In case of El-Nino kharif coarse cereals production could fell by 5 - 10% but in case of normal monsoon it may jump 8 - 15% same way oilseed production fell 10% and may jump by 14 - 20% respectively," said Jagdeep Grewal, Director, Kunvarji Commodities.

Kedia believes that the decline in agri commodities would continue in future well.

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