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Pulses Special: Government Procurement Key to Price Rally in Chana; Expected to Head Higher by Next Quarter

23 Feb 2021 4:08 pm
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New Delhi (Commodities Control) - New crop arrivals are clearing any confusion surrounding chana’s future prospects. Post-Covid, market hopes for pulses’ demand to improve as the Indian economy tries to get back on track. Consumption patterns, anticipated government procurement along with fierce buying expectations by private companies and stockists are most likely to keep chana prices elevated in the future.

Having said so, the market will continue to feel the heat of new arrivals until the commencement of purchases by Government agencies. If the output exceeds traders’ estimates of 85 Lakh tonnes then Government procurement will be the only cushioning factor for chana prices.
Meanwhile, the market sees the pulses’ price headed towards Rs 5,500-5,600 per Quintal in the upcoming quarter from current levels of Rs 4,750-4,800/Quintal.
It is to be noted that in the current crop year, acreage of Chana has increased by 4.37% YoY, to 112 Lakh hectares. This rise in sowing is attributed primarily to higher acreage witnessed in Maharashtra and Gujarat. Having said so, chana reported decline in acreage in madhya pradesh, as the growers preferred cultivating wheat over gram.
Meanwhile, untimely rains and unfavourable weather conditions in Maharashtra during harvest has weakened the prospects for chana output in the state. Even in M.P, chana crop had to face the brunt of hailstorms and unseasonal showers, thereby affecting chana output in the state. The output for the pulse was estimated around 95-98 Lakh tonnes earlier, but the projection has now been slashed to 80-85 Lakh tonnes due to poor output prospects in Karnataka, Chhattisgarh along with Maharashtra and Madhya Pradesh.
Although Government estimates sit around 115 lakh tonnes, while the country witnessed a total production figure of 85 lakh tonnes last year. There's a sizable difference between the trade’s and Government’s output estimates. If the output overtakes trade projections, chana prices will be suppressed.
Meanwhile, supplies of imported chana are likely to be limited this year, although the number will be higher than last year’s imports. Nearly two lakh tonnes of chana was imported last year while it is expected to double this year.
Australian chana’s CNF is quoted around $600 per tonne (close to Rs 4350/Quintal). With an import duty levy of 60%, the prospects of imports further thin out. Tanzania chana was priced at $660/tonne (Rs 4780/Quintal) as duty shall not be levied here on account of LDC relief. Having said so, new crops in Tanzania shall not arrive before August-September. Meanwhile Kabuli Chana imports from Sudan, Ethiopia and Burma are duty free and the Sudan kabuli quoted at $650 a tonne. 44% Duty is applicable on Russia origin kabuli chickpea and Russia Kabuli is offered at $575-$580.

It is only around May-June that the Government is expected to allow imports, in case supply tightness is witnessed in chana. Chana is currently priced under the Minimum Support Price of Rs 5,100 per quintal and the Centre is expected to let the prices soar to meet the MSP. It is only when the open market rates surge past MSP and the difference widens, that they may even give nod to import duty reduction. In such a situation, chana imports will touch levels of four lakh tonnes.
Apart from the acreage, output and import estimates, other factors responsible for giving direction to the commodity are Government procurement of chana along with other pulses along with their respective stocks and subsequent sale by the Government agencies.
NAFED is in possession of nearly 11-12 Lakh tonnes of chana stock, while the Government agency held 30 lakh tonnes last year. This indicates that NAFED might step in during peak arrivals season, for chana procurement to replenish its stocks this year. The Govt. agency has its plan ready for the procurement drive. This can effectively take chana prices ahead of its MSP. Even the farmers await Government procurement in order to offload to their supplies at the mandis.
It is to be noted that during Pandemic-led lockdown, chana prices had tanked amid decline in consumption. Futures prices slashed to Rs 4,250-4,350/Quintal. Although the Government came forward with its PMGKY wherein the poor and destitute along with migrant workers were provided with 1 kilo of chana dal, free of cost, every month. Nearly 80 crore poor families, reportedly, received free chana dal under November-end.
Now with the lockdown restrictions have been set aside for while, hotel-restaurants and almost every kind of eatery is back in business. Marriage functions, parties and celebrations have resumed with all the energy, leading to higher demand for chana besan. The pulse is comparatively cheaper than other pulses, due to which its consumption is likely to stay for a while. As compared with last year’s consumption of 89 lakh tonnes, the figure is anticipated to edge higher to 92 Lakh tonnes this year.
Meanwhile chana harvest has commenced in Vidarbha and Marathwada regions, while arrivals have started to trickle in Madhya Pradesh. The new crop arrivals in U.P and Rajasthan will commence a month later. Chana prices have been moving forward after having touched bottoms of Rs 4250-4350/Quintal. Futures recently peaked at Rs 4,795, while spot prices are hovering close to Rs 4750-4800/Quintal levels. It is to be noted that NAFED will soon begin its procurement drive at the MSP of Rs 5,100 per Quintal.
Thus, as previously mentioned prices are unlikely to witness steep fall even during peak arrivals season. Demand from private companies and stockists will cushion the gains. Market participants are expected to make robust purchases in the absence of stock limits, so there is a possibility of supply squeeze for dal millers. In Fact Maharshatra dal millers are already fretting over the lack of mill-quality chana. However, M.P and Rajasthan arrivals may be able to look into the crisis. More now, we expect futures along with spot to rally as high as Rs 5500-5600/Quintal.
Fundamentals may seem outright supportive but technical charts indicate otherwise. Delhi Spot Chana is expected to consolidate in the near future, while it has strong support at Rs 4,650/Quintal. The commodity is quoted near Rs 4,750/Quintal, but may tank to Rs 4,250/Quintal in case it slips beneath its support level.

India Chana Supply Demand Balance Sheet (Jan-Dec)

All Units in Million MT

2018

2019

2020

2021

Opening Balance

2.60

2.70

2.20

1.90

Production

8.10

7.20

8.50

8.50

Imports

0.00

0.40

0.20

0.40

Total Supply

10.70

10.30

10.90

10.80

Domestic Consumption

8.00

8.10

8.90

9.20

Exports

0.00

0.00

0.10

0.10

Total Usage

8.00

8.10

9.00

9.30

End Stocks

2.70

2.20

1.90

1.50

Stock to Consumotion Ratio

34%

27%

21%

16%




       
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