That’s what analysts say about the essential commodity basket, including pulses, rice and spices, a surge in which was led by oilseeds.
A rise in production and supply disruptions amid evolving consumer behaviour will likely hurt the prices. However, a normal monsoon and lesser weather disturbances in comparison to last year may be supportive, they add.
“If the second wave turns out to be more devastating than the previous one, we may see prices of essential commodities (oilseed and edible oils) again shoot up while prices of non-essential commodities like cotton may take a hit,” said Ravindra Rao, VP and Head of Commodity Research, Kotak Securities.
Both the commodities may see some profit booking going forward, which may limit the returns for this year. “The prospects of a normal monsoon hint at bumper production of oilseed in the kharif season (especially, soybean and groundnut), which may also keep oilseed and edible oil prices in check,” Rao said.
The edible oil pack gave phenomenal returns in FY21, with crude palm oil topping the chart, spiking as much as 73 per cent. Soybean was also a major gainer, with the price jumping 63 per cent followed by soy oil (58 per cent).
Mustard, which was the weakest in the segment during the year, gained 42 per cent. Among other agro-commodities, cotton moved up around 30 per cent.
This happened in a challenging year from an agri-commodities perspective, with issues ranging from import restrictions, high demand, low global production and changing food habits.
Going forward, agri-commodities may continue to remain in focus, but with more modest jumps in rates compared to the last one year.
“Agriculture commodities are witnessing a supper cycle this year due to the ongoing virus infections… Consumers are preferring healthy diets and their hoarding capacity is increased and that is impacting agriculture commodities prices positively,” said Manoj Kumar, Director-Head of Commodity research, Prithvi Finmart.
“Certainly, the reimposition of lockdowns in some states or a full-blown lockdown could disrupt the supply chain of agriculture commodities… Though one thing is noticed that the government is not in a mood for a full lockdown this time, it is also having a focus on the supply management of essential commodities,” he said.
A surge in new daily Covid-19 cases in India to record levels has led some states to reimpose lockdowns and other restrictions. Saturday marked the fifth time last week when cases in the country jumped by a record level in a day, amid many states complaining of vaccine shortage.
The second wave of infections appears to be much worse than the first one. This has many analysts worrying whether the pandemic will once again send the financial markets seesawing, and food prices soaring, although many believe the country would not impose a full lockdown again to curb infections.
Brace for surprises
“If we see a normal monsoon as per expectations this year, it will definitely offer some relief to buyers. However, supply fears may keep getting triggered in between, given how the administration handles the next stages of the pandemic,” said Gaurav Katariya, founder of Mayukhi Investments.
While weather office India Meteorological Department (IMD) is expected to release its formal monsoon projections late this month, a US-based private weather forecaster has projected a close-to-normal monsoon season for the country, which depends on seasonal rainfall majorly for its agricultural output.
“The overall scenario will keep essential commodity prices very sensitive this year and, therefore, one should be ready for surprises,” said Katariya.
Cotton to take lead after oilseeds?
Following the trend in oilseed and edible oil in the last season, farmers would be seen more inclined towards cultivating oilseed crop this time against other kharif crops such as cotton, which can give good returns in the latter part of the year on any decline in acreage compared with last year, said Rao.
India’s cotton export prospects are still bright as its cotton is among the cheapest in the world. A normal monsoon will result in higher area under oilseed crop this season, which will eventually bring down prices in the coming months, he said.
With sowing of soybean and cotton hitting all-time high levels last season, the resurgent Covid-19 cases and the government’s ability to curb infections are likely to influence prices of both the commodities, said Rao, who expects soybean prices to come down in the coming months, and projects NCDEX soybean to decline to near Rs 5,600-5,700 per quintal levels.
