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Production woes to lift groundnut above MSP level

Peanut Market News November 26, 2018

Production woes to lift groundnut above MSP level

Groundnut seed prices, which touched a two-year high earlier this month, are expected to rise another 20% by December, largely because of rise in demand amid a likely fall in kharif output.

An expected fall in output coupled with a persistent rise in demand from oil millers is expected to lift groundnut prices above the minimum support price of 4,890 rupees per 100 kg.

Prices are seen hovering at 4,950-5,200 rupees per 100 kg by December, market participants said.

In Junagadh, a key market for groundnut in Gujarat, the oilseed was today sold at 4,400 rupees per 100 kg, traders said.

For most of 2017-18 (Jul-Jun), prices were below the minimum support price because of a bumper crop and inadequate procurement by the government.

"Prices may rise further this year because of a smaller crop and upbeat demand from exporters," Saurashtra Oil Millers Association President Samir Shah said.

The country's groundnut production in the ongoing kharif harvest is likely to fall 27% to 5.20 mln tn, according to Indian Oilseeds and Produce Export Promotion Council.

"Below-normal rainfall has significantly hit the groundnut yield across major growing states, due to which we have cut our estimates," an official with the oilseed trade body said.

According to farm ministry data, the kharif crop is estimated at 6.33 mln tn, against 7.54 mln tn in 2017-18.

The Solvent Extractors' Association of India has pegged kharif groundnut crop at 3.74 mln tn, down 29% from last year, attributing the decline to scanty rainfall in Gujarat and other growing regions.

In Gujarat, the top producing state, groundnut production in the kharif season is pegged 32% lower at 2.1 mln tn.

The southwest monsoon rainfall in Gujarat was 28% below normal, but in the oilseed-dominated Saurashtra and Kutch, it was 34% below normal, which is seen impacting the yield. 

The supply crunch is also affecting availability of its derivatives in the market. This would also push up the prices of groundnut seed, said Jayesh Kumar, the owner of Dala Brothers based in Junagadh.

On an average, 50,000 bags (1 bag = 100 kg) of the oilseed are arriving in the key markets of Gujarat. However, the overall demand is 70,000-80,000 bags, traders said.

"Demand for the oilseed had risen 15-20% due to strong demand from domestic buyers ahead of Diwali and the pace would continue after the festival," said Mukesh Kumar, a oilseed trader based in Rajkot.

Along with rising demand from domestic buyers, surge in export demand for new groundnut crop from Gulf countries is contributing to the bullish sentiment in the market, traders said.

Exports are usually higher when fresh crops hit the markets and overall overseas shipments would be marginally higher than 504,019 tn last year, Shah said.

Exports during Apr-Aug were higher at 201,193 tn against 157,329 tn in the same period last year, according to Agricultural & Processed Food Products Export Development Authority data.

A sharp fall in sowing of rabi groundnut this year would further provide buoyancy to prices, traders said.

The area under the rabi crop across the country was 136,200 ha as of Thursday, down 30.3% on year, according to data from the farm ministry.

The normal acreage for the entire season is 784,600 ha, based on the average of the past five years, according to the data. However, higher carryover stocks may keep any sharp upward movement in prices in check, an official with the Solvent Extractors Association of India said.

The country's carryover stocks in the year to September were estimated at 1 mln tn, up from 400,000 tn last year, the official said.

National Agricultural Cooperative Marketing Federation of India also holds over 600,000 tn of stocks from last year's procurement, which may check any steep rise in prices, he said.  End

Source: http://www.cogencis.com/newssection/trendoutput-woes-lift-groundnut-prices-msp-level/

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