NCDEX Chana Edges Higher On Short Covering: April 11, 2012

Chana spot prices extended gains of the previous day and settled 1.22% higher on Tuesday. However, futures witnessed mixed trades and settled 0.78% lower on Tuesday owing to rumors of possible strict action by the Forward Market Commission to curb sharp rise in the prices. Reports of lower output in Rajasthan are 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.

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.

Meanwhile, Madhya Pradesh traders are on strike in protest against certain rules enforced by central government under recent changes in Food Safety Act 2006. As per traders, local mandis are closed till 11th April but the protest might extend to 15th April (Source: Agriwatch). Apart from the already imposed special margin on Chana, FMC has now cut position limits wef 10th April, to curb the volatility in prices.

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.

Demand Supply Scenario

The import of pulses is likely to cross three million tonnes this fiscal due to growing demand, 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 increase in imports this year. Around 74% of Indian chickpea imports come from Australia.

However, despite increase in Australian Chickpeas production in 2011-12, lower carryover stocks and increasing domestic consumption may lead to 18% decline in chickpeas exports from Australia in 2011-12.