Chana Records 80% Gains In 2016; What Next?

MUMBAI (Commoditiescontrol) – 2016 was not as good as was 2015 for most of the pulses as prices dropped sharply in the range of 7 to 40 percent, while chana (Indore-Kantewala) was exceptional among them, which recorded yearly gains of 80.85 percent against 2015 mainly due to mis-match in supply-demand. Government intervention, record imports followed by bumper kharif sowing helped tur, urad, moong, masoor and matar to edge lower.

Let’s first talks about chana which was in highlight in 2016 due to lower production in the country amid back-to-back drought years of 2014 and 2015. Chana production in 2014-15 and 2015-16 witnessed sharp downfall from record production of 9.53 million tonnes in 2013-14. Chana produe in 2015-15 dropped to 23.08 percent at 7.33 million tonnes compared to a year ago, and later in 2015-16 edged lower by 2.18 percent to 7.17 million tonnes as not only adverse weather condition hurt chana production, but acreage also declined.

Chana acreage in 2014-15 dropped sharply by 13.62 percent to 8.57 million hectares versus 9.92 million hectares in 2013-14, which later in 2015-16 dropped at 8.54 million hectares. However, acreage in current rabi 2016-17 season is likely to see sharp jump due to attractive rates. According to most recent agriculture ministry data chana as on December 28, 2016 has been sown in 94.81 lakh hectares.

Chana Surges To Record Level
Chana in 2016 touched low of 4,700, while jump to record level of 10,800. Chana prices started spiraling since February amid prospects of lower production due to lower acreage amid poor rainfall, which promoted stockists and traders to corner majority of stocks. Chana peaked Rs 10,800/100kg in October 20, 2016 when consumption usually remains at peak due to festival season like Navratri, Dussehra, Durga Pooja and most import Diwali. Supply of chana at peak consumption period was very tight due to slow selling by stockists and thin stocks. Further reports of delay in shipment from Australia also added fuel.

The other reason, which was culprit behind rise in chana was uncertainty about crop numbers. The government estimated 2015-16 crop at 7.17 million tonnes, while Edelweiss Agri Research forecast crop at 5 million tonnes, while industry experts crop numbers were much lower than what was projected by government.

According to balance sheet drawn by Edelweiss total supply for 2016-17 (March-February), including opening stocks of 0.12 million tonnes will be around 5.3 million tonnes, almost in line with projected demand of 5.2 million tonnes, leaving ending stocks to fall to record low level of 0.10 million tonnes.

Roller Coaster Ride In Chana In November-December
Chana price on October 20, 2016 touched a record level of Rs 10,800/100kg and thereafter witnessed roller coaster rise (see chart 1) due to slowdown demand against tight stocks in the country followed by delay in shipment from Australia on adverse weather condition.

Chana In Correction Mode; But Tight Supply May Provide Support
Chana from the peak of Rs 10,800/100kg has corrected more than 30 percent at Rs 7,500/100Kg, but what next?

Chana supply from Australia has started and is rising week-on-week as Indian importers have contracted around 6-7 lakh tonnes, which are expected to reach by February. According to data compiled by commoditiescontrol around 3.58 lakh tonnes of chana, including 0.83 lakh tonnes in container and nearly 2.75 lakh tonnes in break bulk vessel arrived at Nhava Sheva and Mundra port.

Further higher sowing in the country has raised prospects of bumper production, which is likely to pressurize chana price in the near or long term. Chana may find some support for Makar Sankranti and Pongal demand, but overall outlook is not promising. Further chana price is stressed by cheaper substitute like pea (matar). Demand in processed chana (chana dal) is poor as peak consumption demand period is over.

Conclusion: Prospects of bumper production amid higher acreage, consistent overseas supply, weak domestic demand, cheap substitute (pea) is likely to push down chana prices at least to Rs 6,100 and below. However one should keep a close eye on weather as it will play a crucial role going forward. Good weather will support bumper crop and weigh on prices, whereas any disturbance will arrest fall and led to surge in price due to lower stocks in the country.

(By Commoditiescontrol Bureau; +91-22-40015533)