Financial Daily from THE HINDU group of publications
Thursday, Aug 05, 2004
Agri-Biz & Commodities - Commodities
Commodity prices turn bullish
Chennai, Aug. 4
PRICES of various commodities from grains to milk to edible oils are turning bullish since June-end, when monsoon began to play truant. Though monsoon has revived since last week, fears of lower productivity still haunt the market. As a result, prices are still ruling firm.
Going by the Government's weekly report, inflation for the week to July 17 was higher at 6.52 per cent year-on-year. Inflation crossed the 6 per cent mark during the first week of July after the Government revised the prices of petroleum products.
On the other hand, rainfall, from a meagre shortfall of 1.85 per cent in June, declined by 22.94 per cent during July 1-28. Monsoon began to stutter from the last week of June. Until June 23, there was an excess rainfall to the tune of 23 per cent. The price behaviour of various commodities also shows that the rise began from the time rainfall started decreasing.
For example, milk powder prices in Delhi began to decline in June to Rs 78 per kg but as the monsoon got delayed, the prices started rising. As on July 29, it was quoted at Rs 93 a kg, up 19 per cent within a month.
Except for sugar, the pattern is similar for other products too with prices that tended to dip in June gathering momentum to rise in July and continuing this month.
In the case of sugar, the prices are up by a little over 2 per cent from June to July.
On a yearly basis, they are up by over 20 per cent, mainly since the production was estimated to be down by over 50 lakh tonnes during the current crop year (October 2003-September 2004).
Though the Government officials term the increase as "sentiment-driven," trade sources say the rise is based on the demand-supply estimates.
They point out to the case of edible oils. Prices of edible oils witnessed a downtrend at the beginning of June on reports that area under oilseeds would go up and a harvest on par with last year's record crop was possible.
However, as rains were delayed in the soyabean and groundnut belts of the country, the prices began to rise.
The prices peaked towards the third week of July but when rains lashed central India in the last week, they eased a little. Groundnut oil (ready) ruled at Rs 520 per 10 kg on July 26 before it eased to Rs 498 on Wednesday on reports of rain. Similar is the case with refined soyabean oil (Rs 455 on July 26 and Rs 444 on Wednesday) and RBD palmolein (Rs 426/Rs 414).
Cotton also witnessed the same trend with prices easing to Rs 23,400 a candy (356.56 kg) during June from Rs 24,000 in May before increasing to Rs 24,000 by July-end. However, rains in Maharashtra and Gujarat since the beginning of the week have resulted in the prices dipping to Rs 23,500.
According to the Government officials, inflation is not a cause for worry and the food stocks situation is comfortable.
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