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Informist, Monday, Dec. 23, 2024

 

By Anjali Lavania

 

MUMBAI – Groundnut prices that have been on a fall for over a month are expected to continue with their bearish trend in the near to medium term due to multiple factors, including high output in key producing states like Gujarat and Madhya Pradesh. Market participants believe that a fall in prices will be due to other factors as well, like delayed procurement by the government, huge arrivals, poor quality stocks damaged by rain, and weak export demand. 

 

 

While experts are divided in their opinion about the price levels, some of them see the prices falling to a low of INR 4,950 per 100 kg. Groundnut is cultivated across the kharif, rabi, and summer seasons, but nearly 90% of the production is concentrated in the kharif season, which lasts from June to October. The marketing year of the crop is from October to September.

 

 

"Groundnut prices in Junagadh, Gujarat, are currently at INR 5,200-INR 5,250 per 100 kg. On a week-on-week basis, prices have seen a slight increase of 0.5%. However, on a month-on-month basis, the prices are down by 2%. Compared to the same period last year, the prices have experienced a significant decline of 21%, highlighting a notable decrease in market value over the past year," said Indrajit Paul, head of research of Agrocorp International. Explaining the fall, Paul said groundnut arrivals from Oct. 1 to Dec. 16 were higher at 403,766 tonnes against 380,735 tonnes last year, up 6% on year, Paul said.

 

"Groundnuts are arriving in large quantities in Gujarat's Gondal, Rajkot, and Junagadh mandis, and in Uttar Pradesh's Jhansi, Mahoba, and Mauranipur. Rajasthan's mandis are also seeing new stock arrive," said Rahul Chauhan, director of IGrain India. 

 

The 2024-25 crop of groundnuts is expected to be a bumper one, with the Department of Agriculture and Farmers Welfare putting the first advance estimate at 10.36 million tonnes in 2024-25 compared with 8.67 million tonnes last year. Groundnut production in Gujarat is pegged at 5.23 million tonnes against 4.51 million tonnes last year. In Madhya Pradesh, production is seen at 1.44 million tonnes against 966,000 a year ago. Similarly, production in Tamil Nadu is seen at 446,000 tonnes against 417,000 tonnes a year ago and 163,000 tonnes in Andhra Pradesh against 160,000 tonnes a year ago, according to the data.

 

The rise in arrivals due to the bumper output has resulted in a fall in groundnut prices in Gondal in Gujarat by INR 100 to INR 5,300-INR 6,850 per 100 kg as of Friday, said Ashok Virvani, a trader from the state. Demand is sluggish as most of the stock is of poor quality, damaged by rain, he added.

 

Excessive rains, filling of godowns with rainwater, and overflowing of rivers have damaged kharif crops during the south-west monsoon season. "Most of the godowns in Junagadh, Saurashtra, Rajkot were filled with rainwater, which eventually resulted in poor quality of groundnuts," Virvani said. India received rains of 934.8 mm in Jun-Sept, up from the normal of 868.6 millimetres, as per India Meteorological Department data.  

 

Additionally, low procurement has also contributed in bringing down prices. As of Dec. 16, the National Agricultural Cooperative Marketing Federation of India Ltd., has procured 265,183.63 tonnes of groundnut, which is nearly 13% of the total sanctioned quantity of 2.05 million tonnes. The Centre has allowed Gujarat, Karnataka, Rajasthan, Haryana, Andhra Pradesh, and Uttar Pradesh to procure groundnuts at a minimum support price of INR 6,783 per 100 kg. However, the procurement started only in Gujarat, Rajasthan and Uttar Pradesh with minimal purchases. In each of these states, procurement has been slower than last year.

 

In Gujarat, 202,633.82 tonnes were procured as of Dec. 16, which is nearly 16% of the sanctioned quantity of 1.31 million tonnes, and in Rajasthan, 46,627.11 tonnes of the sanctioned quantity of 531,828 tonnes was purchased, according to the data.

"Despite the procurement efforts, the market prices are currently around 22.5% lower than the minimum support price set by the government. This indicates that the procurement programme has not been effective in supporting market prices or providing significant relief to farmers and other stakeholders in the groundnut value chain," Paul said.

 

What is of a further concern to the trade is that the Central government had sanctioned procurement in Karnataka, Haryana, and in Andhra Pradesh as well, but none of them has begun the operation.

 

"Recent price declines in domestic markets have raised concern, primarily attributed to weaker demand and surplus production," said Abhimanyu Solanki, director of KDC Agro & Textile Industries. Gujarat, the largest producer, continues to lead with consistent output. States like Andhra Pradesh and Tamil Nadu are also contributing significantly. Additionally, the bumper crop reported in states like Madhya Pradesh is further putting pressure on prices, he said. 

 

As if this is not enough of a challenge, the export demand has also dwindled. The Indian groundnut market largely depends on export demand. This year, export demand has been poor. India exports three varieties of groundnut--Bold, TJ, and Java. Exports to Iran and Algeria were down this year. According to Neharu Kher, the managing director of Across Overseas Pvt Ltd, it is not viable for farmers to grow groundnuts if export demand is weak or absent. "Export demand was very bad this year," Kher said. "Most exporters were unable to ship more than 50 containers, when they used to export 300–400 containers every year."

 

According to the commerce ministry data, exports of groundnuts from India to Taiwan fell 55% on year to 175 tonnes, to Djibouti by 75% to 557 tonnes, and to Oman by 61% to 289 tonnes, in Apr-Oct. Groundnut varieties damaged by rain and high in moisture are generally not preferred by exporters, Virvani said. During 2023-24 (Oct-Sept), India groundnut exports fell 5.8% to 687,000 tonnes, said Paul.

 

Experts vary in opinions. While Chauhan is of the view that in the near to medium term, groundnut prices may trend downwards in the range of 5,500-6,000 per 100 kg, Paul is of the opinion that in the near-to-medium term, prices may hit a low of INR 4,950-INR 5,300 per 100 kg.

 

"In the short to medium term, groundnut prices are expected to remain bearish in the range of INR 4,950-INR 5,300 per 100 kg. The bearish trend is likely to persist unless prices breach INR 5,490 per 100 kg, which could signal a potential recovery in market sentiment. If prices breach this level and sustain, then prices may see some positive momentum in the long term," Paul said. The variation in prices is due to the variety and grade of groundnut in various markets across the country, Paul added. End

 

Edited by Akul Nishant Akhoury

 

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