FADING STOCKS, PRICEY IMPORTS BRING BULLS BACK TO CHANA

After touching a three-year high in June a Rs 4,800 per quintal, chana spot prices corrected to Rs 4,300 due to government interventions like imposition of stock limits in certain states and reports of pulses’ imports by state agencies. The above normal monsoon during June and reports on floating of import tenders for chana from Australia also weighed on the prices. However, the announcement of bonus for the pulses crop by the government and relaxation of stock limit for Warehousing Development and Regulatory Authority (WDRA)-registered warehouses helped recover prices again to the Rs 4,600 level recently. Nevertheless, the spot prices of chana surged about 27 per cent since April this year.

Earlier this year, prices had been hovering between Rs 3,350-3,650 per quintal in the physical markets till April. The reason for the range-bound price movement was mainly due to expectation of a good harvest of new crop in Maharashtra and Karnataka coupled with higher imports as the government extended duty-free import.

Since November, i.e. the start of the new chana season, the average monthly prices of chana on the National Commodity and Derivatives Exchange (NCDEX) have been in uptrend and surged from Rs 3,190 per quintal to Rs 4,560 in May before declining to Rs 4,340 in July. The continuous increase in price is due to reports of the lower sowing area and less rainfall.

Weather Impact on Production

Last year, deficient rainfall across the country affected the sowing of chana. Moreover, unseasonal rain in northern and central parts in March during pod-filling and harvesting stage damaged substantial area under the chana crop. The Department of Agriculture & Cooperation (DAC), in the third advance estimates, revised chana production down at 75.9 lakh tonnes (lt) from 82.8 lt reported in the second estimates. However, the Indian Pulses and Grains Association’s (IPGA) pulses’ survey has estimated about 55.6 lt production of chana in India for 2014-15, less by about 15 per cent from previous year’s 65.1 lt.

Duty-Free Imports

Last year, to ensure remunerative prices to farmers and encourage them to plant the crop, the Ministry of Agriculture imposed a 10 per cent import duty on chana till December 2014. However, due to lower sowing data, the government extended duty-free import of chana till March and then again extended this till September on reports of heavy losses due to unseasonal rain.

According to the latest government data, for FY 2014-15, India imported 4.19 lt of chana compared to 2.76 lt imported in the previous year i.e. 2013-14. India imports chana mainly from Australia, Russia, Tanzania, Iran, Myanmar and USA. India has imported more than 60 per cent chana from Australia last year. According to the traders, the chickpea prices have increased more than USD 150 in a month to above USD 800 per tonne in Australia. That means the landed cost of chana in the country comes to more than Rs 5,000 per quintal.

The peak time for forward booking to import chana is between July and October. The Government of India has approved large-scale imports of chana from Australia to shore up supplies through state-owned trading firms such as MMTC, STC and PEC, which may increase prices in the international market.

MSP and Stock Limits

For kharif pulses, the government announced bonus of Rs 200 per quintal over and above the rise in Minimum Support Price (MSP) to boost domestic production and reduce import dependency. The same is expected for the chana crop and this may lead to a surge in the domestic prices.

Meanwhile, some state governments have imposed stock limits for various pulses to ensure sufficient stock availability in the market for the end consumers. However, they later decided to exempt all the warehouses registered with WDRA from the stock limit provided they will provide updates on stock positions on a real time basis.

Global Production

According to Pulse Australia’s crop forecast, in 2015 chickpea was planted on 6,26,500 hectares compared to 3,70,150 hectares last year, a 70 per cent increase. The increase in planting area is mainly due to a strong rally in the prices. The production in Australia is forecasted at about 7,50,000-8,00,000 tonnes compared to 4,75,900 last year. For 2015-16, in Canada the area seeded intended to fall sharply compared to 2014-15 because of high carry-over stocks and continuing decline in prices. According to Statistics Canada’s data, Canadian farmers intend to plant 61,000 hectares of chickpeas in 2015-16, down from 73,000 hectares seeded last. Chickpea production is expected to fall sharply to 1,15,000 tonnes from 1,31,000 tonnes, while exports are forecasted at the same level as last year at 70,000 tonnes.

Outlook

Chana prices are green again, buoyed by greater demand, huge imports and uncertainty about the next Indian harvest. Heavy rains this June helped in record plantings of kharif crops but the forecast of below normal rains in July, August and September might affect the rabi crop. Chana prices may come under pressure due to relatively lower carry-over stock in the domestic market, dry weather conditions in Australia, and lower area under chickpea cultivation in Canada. There are apprehensions that any adverse weather conditions will surge chana prices under tight fundamentals. The movement of price will depend upon how the monsoon is going to be in the next two months, as it gives some indications about the next crop size in the country.

Strategy: BUY NCDEX CHANA SEP AT 4,600 – 4,650, SL – 4,450, TARGET – 4,900 / 5,000 (CMP- 4,700).