Pulses Special : Tur Prices to Head Higher Post-June amid Lower Output & Limited Stocks; Tech Indicate Buying Opportunity

Mumbai (Commodities Control) - For 2020-21, Tur Production is seen falling below expectation despite higher kharif season acreage. This will inflate the pulses' price. Tur prices at Akola Mandi broke above Rs 7,000/Qtl as of 5th January 2020.

The consistent demand from stockist, lower production helped pull up the Tur prices in the last two weeks. The lower than expected production in Tur and political imbalance in one of key supplier country--Burma will all play their part in stock depletion of Tur in India over next few quarters.

Having said so, tur prices are seen holding stable ground during Q1 2021, however a northward rally is anticipated June onwards.

India’s Tur production this year is estimated to be 29.5 lakh MT, 23% lower from last year. The early sowing, untimely rainfall just on verge of harvest has belittled crop yield.

Crop yield and production in Karnataka has remained like last year, but the crop in Maharashtra specially in Vidarbha and Marathwada region has suffered heavy yield losses due to heavy rainfall just at the onset of harvest.

Although the acreage pushed higher due to initial supportive weather, but weather disturbance at later stages have led to loss in yields.

Meanwhile, India is estimated to have imported about 0.45 M MT of tur in 2019/20, while for 2020/21 we forecast the import to be up to 0.65 M MT primarily due to supply depletion from lower production and lower carry-over stocks this year. In the present scenario, domestic production is estimated to be lower than last year.

Even the Government agencies have done a shoddy job in terms of keeping a check on price rise, as NAFED and FCI are estimated to hold about 0.13 M MT of stocks, far lower than 1.5 M MT it held last year. It has drawn down the overall availability of tur stocks locally. With the prices hovering close to MSP, these agencies are unlikely to be able to make significant purchases due to which Indian will be faced with the tightest stocks situation in five years.

This means India will be dependent on imports to suffice the lower supply this year. The allocation of import quota can be given by as early as March '21 as per one of the importers. Imports are bound to open, once the local supply starts to deplete which may happen by April-June Quarter this year. Indian Govt renewing the free trade agreement for current year with Mozambique for tur import is the sign of the preparation of lower domestic supply. It is to be noted that Burma is witnessing ongoing arrivals of new Tur. New Tur crop is expected to be around 1.5 Lakh MT. Carry over stock is approximately 50,000 MT.

Not to mention, the pandemic of coronavirus has brought unprecedented economic disruption in Indian economy and months of lockdown made livelihood difficult for a large section of society. Government has distributed grains, pulses and other essential food items, mostly for free to the poor and thus, helped increase the consumption.

In the pulses segment, Govt distributed Chana dal and the activity had an impact on Tur dal consumption negatively. Government distribution of chana dal led to lesser consumption of other pulses including Tur dal. Income loss among the populace led them to consume the cheapest sources of protein or in lesser volumes.

In 2020/21, in absence of PDS distribution of chana dal, tur dal is likely to gain back its lost share of demand. We anticipate higher household consumption of dals for the current crop year.

HoReCa (Hotel-Restaurants-Catering) sector is slowly heading to recovery on the back of vaccination and lesser cases. Improved hospitality sector, wedding functions and social events will lead to increased consumption. As the sector represents a big chunk of tur dal consumption, recovery will lead to improved demand for Tur dal.

NAFED has been a major player in the tur market since past few years driving the market with its procurement and sell off. However, as mentioned above, NAFED and FCI together only hold about 0.13. M MT of Tur carry-over stocks. With current prices just around MSP, it is unlikely that NAFED will be able to procure any significant volume of Tur this year. With this it will be after 5 years that the market is emerging in the new crop year without holding any significant burden of carry-over stocks by NAFED or FCI.

India Tur Stocks are projected to be lowest in 5 years at 0.31 MMT on account of lower production, depleted NAFED stock. NAFED and FCI together only hold about 0.13 MMT of Tur carry-over stocks. With current prices just around MSP, it is unlikely that prices may go down significantly. End stocks indicate that supply tightness will through the crop year 2020/21.

We expect Tur prices to remain steady during the first quarter of 2021 with steady flow of arrivals. However, in subsequent quarters prices are likely to trade strong with stock depleting quarter on quarter basis.

It will now depend on how the Govt deals with challenges to intervene and keep prices from rising disproportionately. Govt might intervene with opening up the import quota as early as March/April to stabilise the stocks. The challenges remain, as lower production overseas in key supplier with its political tensions make imports expensive.

Apart from fundamentals, technicals also indicate an upward price rally and buying opportunity in tur. From a chart perspective, since 2015, the market premium of Tur Dal (Akola) vs. Tur Bilty (Akola) has typically ranged between 1.35x – 1.70x (35% - 70% premium). The spread is, meanwhile, approaching the lower threshold (with a current reading near 1.34x). Historical trends suggest there is a good probability for the spread to expand to the upside over the next several weeks. Hence, we believe Tur Dal (Akola) may outperform Tur Bilty (Akola). Meanwhile on a relative trade basis we recommend to Buy Tur Dal (Akola) & Sell Tur Bilty (Akola).

India Tur: Balance Sheet

(By Commoditiescontrol Bureau: +91-22-40015505)