Chana Witnesses Uptrend On Lower Arrivals, Higher Demand: April 16, 2012

Lower arrivals in the domestic mandis coupled with demand from the  local stockists led spot chana prices and futures to settle 3.02% and 2.4%  higher w-o-w. Reports of lower output in Rajasthan are also providing  support to the prices.

As per the NCDEX circular dated 11th  April, Initial Margin(IM) of 10 % of  the value of contract or VaR based margin whichever is higher will be  imposed on all contracts and yet-to-be launched contracts of chana with  effect, from beginning of the day Thursday April 12, 2012.

To curb excess volatility in prices, the government has also imposed a special  margin on chana and has cut position limits last week.

As per the NCDEX circular dated 4th  April, total position limits on all  contracts for members will be revised to 75,000 tonnes from the current  100,000 tonnes and for the clients to 15,000 tonnes from the current  20,000 tonnes, while for the near month contracts, position limits for  members will be revised to 15,000 tonnes from the current 20,000 tonnes  and for clients it will be 3,000 tonnes from the current 4,000 tonnes wef 10th April, 2012.

Arrivals in Rajasthan began over the last 2 weeks, however, the pace is  very slow on account of sharp drop in yields and thereby output in  Rajasthan, the second largest Chana producing state.

Demand Supply Scenario

The import of pulses is likely to cross three million tonnes due  to growing demand, the country's apex body of pulses industry and trade said on Wednesday, 4th April.  

As per Commerce Ministry, imports of  chickpeas, pea and tur by India rose by 1655%, 25% and 16% to 1.7 lakh tn, 16.52 lakh tn and 0.34 lakh  tn respectively (Source: Agriwatch). With the commencement of harvesting in MP, the largest chana  producing state in India, with more than 40% share, we expect supply  pressure to build up gradually.

According to Second Advance estimates, pulses output is expected to fall  by 5.26% to 17.29 mln tonnes as compared to 18.24 mln tonnes in 2010- 11. Chana production is expected to decline by 6.8% to 7.66 mln tonnes  as compared to 8.22 million tonnes in the last year.  

As output is likely to decline, India's pulses imports in 2011-12 (Apr-Mar)  may rise nearly 10% from 2.75 mln tn in the previous year. India's  consumption of pulses is on the rise with an annual growth of around 5%  but production is seen lower, which may lead to an increase in imports this  year.

Around 74% of Indian chickpea imports come from Australia. However, despite an increase in Australian chickpea production in 2011-12, lower carryover stocks and increasing domestic consumption may lead to an 18% decline in chickpea exports from Australia in 2011-12.

Chana prices in the intraday are expected to trade sideways to up owing  to lower fresh arrivals in the domestic mandi of Rajasthan.

Also, prices  may continue to trade with positive bias on supply concerns as overall  output is lower in the current season while consumption is growing at  the same pace, leading to rising imports of Costlier Pulses. In the short term (2 weeks), we expect chana prices to trade in the range  of Rs 3480 and Rs 3840 per qtl levels.