Importers of pulses have a problem, as prices have fallen due to higher sowing and they have entered into forward contracts for importing a high quantity, with delivery between October and December.

A leading importer said with the high prices of pulses a month earlier, due to the earlier projection of the monsoon as below-normal, many small and mid-size traders had contracted for a combined $900 million to $1 billion worth (Rs 5,720-6,300 crore) in forward delivery. India’s average quarterly import is only around $600 mn. In 2014-15, the import bill was $2.35 bn (Rs 15,000 crore).

In the past month, prices of various pulses in the domestic market have fallen by five to 10 per cent. If prices fall below the cost of imports, forward deals could face defaults.

Last year, the source said, good money was made by importing and the idea was to repeat it this year. However, in recent weeks, the monsoon has spread well through the country and sowing has increased. The government has also increased the minimum support prices.

“Sowing for pulses is still on and I believe the acreage will go up, as farmers are choosing pulses. There is a thaw in forward contract deals of late, as most traders are looking at the crop scenario before booking a deal,” said Neeraj Dhawan, a Delhi-based importer.

As the monsoon advanced into key pulses' growing states, sowing had almost doubled to 1.1 million hectares by June 26, up from 0.6 mn ha sown till the same period last year. In June, rainfall was 24 per cent above normal. India Meteorological Department has predicted deficit rain in July and August but private weather information provider Skymet has forecast a normal monsoon in the coming two months. The uncertainty has kept the market tight.

“There is so much apprehension about crop growth that any adverse weather condition will stoke pulses prices, as the fundamentals are so tight. It all depends upon how the monsoon rainfall is going to be in the next two months, as it will give us indications about the crop size,” said Prerna Desai, head of commodity research with Edelweiss, the online share trading portal. Due to shortage of the commodity, many state governments have imposed stock limits on the storage and the Union government has asked state-run trading firms to import in order to contain the rates.

It has also, as stated, increased the minimum support price to encourage sowing, beside extending the zero import duty period till end-September. India imports about three million tonnes a year from Canada, Australia, Myanmar and African countries, to meet an annual demand of about 18 mt. Last year, imports shot up to around four mt because of crop damage and lower output.

Source:- business-standard.com