Commodity Market Update---February 22, 2010

Chana
Market Commentary
Chana futures witnessed a very volatile session last year with Chana March contract correcting by almost 700 rupees after touching high of Rs.2944/quintal in the month of November 2009 to currently trade around Rs.2170 levels. Initially lower production & higher prices in the other pulses such as Tur led a surge in prices. However, prices were capped on the higher side due to steps taken by the government to curtail rising prices such as stock limits imposed in Gujarat, Maharashtra, Rajasthan and Andhra Pradesh and good carry overstocks led prices to witness sharp fall. Prices after making a high are constantly falling due to expectation of higher production in overall pulses segment.
High prices encouraged farmers to go for improved plantings. Plantings in pulses specifically Chana was boosted by the post monsoon rains in the month of November 2009. Area under Rabi pulses according to the Agriculture Ministry improved, the main contributor being Chana. The increased acreage is prominently visible in chana sowing, which improved to 8.76 million hectares as compared with 8.3 million hectares in the same period previous year. According to the second advance estimates released on Friday (12th Feb, 2010), Production of Rabi pulses this year is expected at 10.53 million tonnes – the first time it has crossed the 10 million tonnes mark. This is mainly on account of gram (Chana) output touching an unprecedented 7.46 million tonnes against 7.05 million tonnes last year.

Outlook

Initially in the short term (till mid of March) prices are expected to correct due to second advance estimate figures given by agriculture minister. However, the output of other Pulses is estimated to remain unchanged and thus prices of these Pulses like Tur, Urad and Moong which had declined in the last few weeks is not expected to fall much. Thus, tracking other Pulses, we do not expect much downside in the Chana prices till March. Further, demand ahead of marriage and festival season may provide support to the prices. In the long term (April onwards),Chana prices are likely to trade with bearish sentiments once prices consistently trade below Rs.2000 levels as fresh arrivals from Rajasthan and MP coupled with estimates of higher production may pressurize the prices.