Urad Rises Sharply After Government Move; What Next?

MUMBAI (Commoditiescontrol) - Urad prices in major market across the country rose sharply After the government on Monday puts urad and moong in restricted category. Burma urad FAQ (Fair Average Variety) increased by Rs 700/100kg in the Mumbai market after this announcement, followed by Rs 500-600/100kg surge in desi variety in many markets.

The government on Monday put imports of urad and moong dal under the restricted category and fixed a cap for its in-bound shipments up to three lakh tonnes for financial year (April-March) in order to help in stabilizing domestic prices that have fallen below the minimum support level and are hurting farmers.

Sellers disappeared as the news spread in the market, leading to sharp rise in the prices of urad in various major markets of the country. There are few sellers in the market right now due to anticipation of more rise ahead.

The spread between Burma Urad FAQ traded at Mumbai & Chennai rose sharply from Rs 200/100kg to Rs 450 due to strong buying observed by Chennai-based traders as they were in short positions for delivery around September 25 and need to cover to fulfill their commitments.

Now the million-dollar question is whether this rise is sustainable or prices will collapse again due to ample supply and record kharif production outlook amid sharp increase in acreage. Let’s jump to supply-demand equation to get a right picture about price movement ahead.

India Apr-July Urad/Moong Import
According to the Ministry of Commerce, import of urad in the country during April-May stood at 0.89 lakh tonnes. Now, if we look at imports during June-July in the last two years, it averaged around 1.70 lakh tonnes, which means that the country has imported estimated 2.59 lakh tonnes during the first four months of this financial year 2017-18. Out of the limit set by the government for this fiscal year 2017-18, the estimated import now left is 0.41 lakh tonnes.

Urad 2016-17 Supply-Demand
According to the supply-demand data collected from market sources by commoditiescontrol, there is ample stocks of urad in the country. Total availability of urad in the country for 2016-17 (Oct-Sept) is estimated at 22.15 lakh tonnes in 2016-17, which is much higher than the domestic consumption of 18 lakh tonnes.

Sharp Increase In Kharif 2017 Urad Sowing
As per data released by the Agriculture Department, urad acreage increased to 39.44 lakh hectares in the country as on August 16, compared to 32.28 lakh hectares in the same period last year (Full Report). The farmers shifted from soybean to Urad in Maharashtra and Madhya Pradesh as Urad prices was above minimum support price during May-June. However, the crop in certain part are under stress due to lack of rainfall, but still output is expected to larger than last year due to sharp increase in acreage.


How Urad Price Will Behave Ahead?
Most sellers have opted to stay sideline after a strong rise in the price amid government's move to put Urad/Moong under restricted category. The activity in the market this week will be truncated due to holiday on Friday for Ganeshotsav followed by Paryushan (Jain festival) on Saturday and then weekend close on Sunday and thus there will be little arrivals of new kharif urad crop and thus some more gain in prices can't be ruled out. But it will be interesting to see demand at the higher level followed by expectations of surge in kharif urad supply after three days of market closure.

There is uncertainty about sustainability of prices at the higher level after government move due to ample stocks in the country followed by commencement of kharif urad supply in markets of Maharashtra and Karnataka.

TECHNICAL OUTLOOK
Urad FAQ Mumbai - Reversal Witnessed (Full Report)

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