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These Commodities May Offer Good Returns for Farmers & Traders during Diwali

Most of the Agricultural markets have resumed the upward trend after a brief correction. Diwali related purchases are on the rise. Although the Kharif season arrivals have commenced, prices are still likely to trade with a positive bias, since the festive season demand is likely to remain strong. Overall, we expect markets to trade with an upward bias in the near term. These are the commodities, which if stocked or held for the next few days, then there may be a better chance of getting decent returns against the purchase costs.

Abhijeet Banerjee

COTTON: Markets have resumed the bullish trend from the third week of September after a brief correction. Prices are holding firm currently. The Cotton Association of India (CAI), a major association for cotton traders, has reduced its estimate of the cotton crop last season (October 2020- September 2021) to 353 lakh bales (each 170 kg) from its previous estimate of 354.5 lakh bales. The final estimate is about 7 lakh bales lower than the 360 lakh bales of crop estimated initially.

Demand for cotton and its products is expected to be strong from Asian countries as the world economies recover from pandemic problems. India may produce less than the earlier estimates on the back of adverse weather in the major producing regions. There are instances of cotton bollworm attacks in the states of Punjab and Haryana, which can curb the yields.  World’s cotton mill use in 2021/22 (August–July) is projected at 123.4 million bales in the latest USDA report, which is 3 percent above 2020/21. China and India lead the way, as per the estimate contributing for a combined 53 percent of the total in addition gains are seen for Pakistan, Bangladesh, Turkey, and others.

Global cotton production is forecast at 120.3 million bales in 2021/22, 7 percent above the year before, because of expansion in the harvested area and a forecast record yield in the leading producing nations. World cotton trade is projected at 46.4 million bales this season, second to 2020/21’s record and supportive of the higher mill use estimate. Global cotton mill consumption is projected above production, indicating a reduction in the 2021/22 ending stocks to 87.1 million bales, the lowest in 3 years. Besides, there are instances of cotton bollworm attacks in the states of Punjab and Haryana, which can curb the yields. The states of Maharashtra, Gujarat and South have been affected due to the October rains. The overall scenario remains positive for cotton prices and by next few days, cotton can appreciate by 3-4 percent nearly.

MUSTARD: The markets are currently range bound but buying interest improves after every moderate fall in prices. The physical markets are constantly reflecting lack of selling intentions amongst stockists and farmers on ideas of price rise in near future. The inventory situation remains tight and as the planting season approaches, demand for seeding will improve. Arrivals are expected to decrease further since this commodity has entered the lean supply season and new season crops shall not be seen before March or April next year. As prices are turning cheaper and festive season demand continues, holding the commodity or re-stocking at lower levels will be the preferred business decision as of now. Edible oils such as soybean oil, palm oil and mustard oil are mostly trading with a firm tone these days. Overall farmers as well as traders can hope for decent returns of around 400-500 rupees on a quintal if they hold for a few more weeks.  

GUAR SEED: This has been a hot commodity this year and as against December 2020 average prices, the benchmark contract has gained nearly Rs.2700/qtl or closer to 69 percent. Markets were range bound between January and March 2021 and April 2021 onwards, prices have started moving upwards. Markets are holding firm till date. Drawdown of inventories since last two years and reduction in the production outlook keeps sentiments positive from a broader perspective. Guar gum, a processed product of Guar seed, has a higher export demand due to its utility in the crude oil industry. Export related queries are emerging for guar gum quite frequently, especially from the oil sector. India enjoys the leading position in production as well as export of this product in the world market. Approximately 80 % of global demand for Guar gum is contributed by India.

Erratic rains during the growing period and lower prices during the last two seasons have adversely impacted guar seed sowing. Ahead of the arrival season, the futures markets may face resistance in moving upwards but the strong fundamentals shall continue encouraging buyers to enter at every correction. Overall, improving guar gum exports outlook, the consistent drawdown of guar seed inventories since last two years, and a significant reduction in crop size estimate (about 30-35 percent lower versus the previous year), shall keep the market supported. Continue holding this commodity and repurchase can be done early next week in case of price depreciation. Gains in Guar seed commodities maybe around 6-8 percent within the next few days.

CUMIN (JEERA) Jeera prices have resumed the upward journey from the third week of September and the markets are still trading with an upward bias. Cumin is up roughly 12% since July end. Prices during that time stood near 13000 Rs/QTL, and were attractive for the exporters as well as the stockists and retailers. Presently the commodity is being traded near 15000 Rs/QTL. As local and overseas consumption started improving, the market could recover from the lower levels. 

Sowing has started due to which there is demand for the seed hence markets have turned volatile of late. India continues to be the major global supplier, therefore the derivatives market shall remain supported in the coming days. Exports of Indian cumin usually decrease after July-August every year when Turkey and Syria used to supply the global consumers. But the situation is different this year. Because of the poor crop situation in these countries, exports were not feasible, unlike the previous year. Therefore most exporters switched to Indian cumin seed this time. 

Demand for Indian cumin has improved in the Middle East and Vietnam in recent months. In response to cheaper price levels and increased demand for immunity-boosting spices, export prospects appear brighter for this year. All in all, continue stocking or holding this spice in order to generate good margins in the near term and most traders expect Jeera prices to move towards 15500-15700 soon.

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