Chana Quarterly Report
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Transcript of Chana Quarterly Report
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7/28/2019 Chana Quarterly Report
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KCSL Chana Quarterly Report Please see the disclaimer on the last page 1
August October 2012
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KCSL Chana Quarterly Report Please see the disclaimer on the last page 2
As per the commodity preview 2012 report released on December 2011 the annual target for Chana was atRs.3950 4000/qtl. Price target for the commodity has been achieved much earlier than anticipated. The rally in
prices was mainly due to the lower opening stocks and uncertainty in weather affecting the potential supply.
Currently the prices are trading near Rs.5000/qtl in the Delhi spot markets. Following is the domestic and
international market scenario so far in the current season (2011-12). In India, Chana is sown during October-
November and harvested during March April.
2011-12 so far
Domestic:
The new bull rally in Chana began from May 2011 onwards, after the peak arrival season had faded. Prices
witnessed sharp gain in 2011 (Jan-Dec) of over 31% as compared to prices in 2010. The rally in prices was
combined effect of marginal decline in domestic production and significant fall in 2010-11 Australian Chickpea
production. Australia is the largest supplier of Chickpea to India.
Just before the 2011-12 season started the government of India raised the MSP for chana boost the production of
pulses. The MSP was increased by 33% or Rs.700/qtl to Rs.2800/qtl. But the area under the commodity for 2011-
12 declined by 4% on weather concerns. Erratic weather during time of growth lowered the yield by around 13%806.4 kg/ha achieved previous year. While the acreage was higher than the normal but low yield resulted in lower
production by 16% to 6.3 million (mn) tons compared to the previous year production of 7.5 mn tons.
International:
Year 2011s price rally in Indian markets was mainly due to significant decline in Australian production. In 2010 -11
production in Australia was pegged at 0.46 mn tons, down by 10% year on year. Lower imports from Australia and
Tanzania impacted supplies to India and resulted in further downward revision in Indian ending stock numbers
23rd
July 2012
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KCSL Chana Quarterly Report Please see the disclaimer on the last page 3
from 1.45 mn tons in 2009-10 to 1.17 mn tons in 2010-11. These nations contribute to nearly 70% and 17% of thetotal imports in the country during 2010-11.
India Supply and Demand Analysis: August-October 2012
SUPPLY
Production
During the year 2011 Chana prices touched record. Despite the annual gain of nearly 31% and higher MSP offered
by the government the commodity failed to gain space in the field. This was mainly due to the late withdrawal of
southwest monsoon, which was delayed by more than 3 weeks. Rains continued till late in crucial Chana growingregions of Madhya Pradesh and Rajasthan. Total area under Chana was recorded at 8.96 mn hectare compared to
9.34 mn ha in previous year down by 4%, but above the seasons normal at 7.61 mn ha. Decline was registered in
key producing states of Rajasthan, Maharashtra, and
Karnataka due to unfavorable weather during the time of
sowing. Some area decline in MP was also due to diversion
to other crops like wheat, oilseeds and other pulses.
Uncertainty in weather during the crucial growth stage
affected the crop yield that dropped to a decade low. KCSL
Research estimates that the yield in current year could be at
705.8 kg/ha, compared to last years yield of 806.4 kg/ha
down by 12.4%. Similar yields were noted in 2002-03 at 717
kg/ha. Productivity at major producing state of Rajasthan
and Madhya
Pradesh
declined significantly by 12% and 10% respectively.
As a result Chana output declined to 3 year low at 6.32 mn tons
compared to 7.53 mn tons in 2010-11, down by 16%. Fall in
production is expected to have declined by 7% in Madhya
Pradesh, Maharashtra by 23% and Rajasthan by 30%.
36%
17%5%
10%
12%
20%
State wise production share for 2011-12
Madhya Pradesh Rajasthan Karnataka
Maharashtra Uttar Pradesh Others
Source: KCSL Research & Ministry of Agriculture and Government of India
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KCSL Chana Quarterly Report Please see the disclaimer on the last page 4
Imports
Lower production for the year 2011-12 could increase countrys dependency on imports. For the year 2011-12 we
estimate chana imports to be at 0.2 mn tons, as compared to 0.1 mn tons last year. The imports are expected to
be slightly higher compared to last six year average imports of 0.18 mn tons. Indias imports during 2010-11 were
at 0.1 mn tons, lowest since last decade due to low imports from in Australia and Tanzania. Out of total imports,
Australia contributes more than 70%. India also imports Chana
from Tanzania, Myanmar and USA; imports from these
countries however have not been consistent.
DEMAND
Exports
Indian trade in Chana is not consistent; depending on the
domestic production number India either turns a net exporter
or a net importer. Indian Chana exports constitutes mainly of
Kabuli variety. Out of the total chana production in India
Kabuli variety consists nearly 5-7%. During the beginning of the season traders were anticipating higher
production for kabuli variety but it is unlikely to be the case now. Kabuli Chana is expected to be unchanged from
last year levels. Low production 2011-12 is expected to reduce the exports sharply by 67% to 0.06 mn tons
compared to the 2010-11. KCSL Research expects export for the current year to be 0.18 mn tons. Exports are alsoexpected to be lower due to price disparity. Currently Indian Chana is quoting at $100 premium to Mexico Chana
in international market. Mexico is the major competitor for Indian variety and usually quotes at a premium of
over $50 to Indian origin. High domestic prices have provided an incentive to Indian traders to sell Chana in
domestic market rather than export.
Consumption
Since last one year Chana prices have been making
new highs. This is expected to have resulted in
demand rationing. Industry bulk users could have
shifted towards cheaper substitutes. Yellow peasare used as substitute for Chana mainly in flour
industry. Higher price for the pulse and potential of
shift in demand for the cheaper substitute could
lower the consumption this year. KCSL Research
expects chana consumption to be lower by 9% at 7
mn tons compared to 7.73 mn tons during last year.
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
2006-07 2007-08 2008-09 2009-10 2010-11(e) 2011-12(f)
Production Consumption and Ending Stocks in Million tons
Production Consumption Ending Stocks
Source: KCSL Research & Mini stry of Agriculture Government of India
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Significantly high prices for edible oil meal across the world are seen due to production failure in South Americaand now USA. South America is the major supplier for soy meal in the world followed by USA. This could result in
a shift of demand towards yellow peas for cattle feed and fodder especially in France. Such a shift in demand
could be seen in India as well where currently the meal prices for all the oil seeds are at record high. We could see
some demand emerge for yellow peas for cattle feed and poultry feed.
Stocks
Year 2011-12 started with a 4 year low stocks at 1.17 mn tons, or down by nearly 19% compared to last year. The
total demand during 2010-11 increased by 2% to 7.91 mn tons while the supply declined by 2% to 9.08 mn tons.
For the year 2011-12 low production and low
beginning stocks could shrink the total supply by
15% to 7.7 mn tons while total demand is also
expected to decline by 10% to 7.09 mn tons.
Significant decline in supply as compared to fall in
the demand could lead to sharp fall in ending stock
numbers. The ending stock numbers are estimated
at decade low. Previous low ending stock numbers
were recorded at 0.88 mn tons during year 2002-
03. Ending stock numbers for year 2011-12 is
estimated at 0.60 mn tons or down by 49% as
compared to last year. The stock to usage ratio could fall to all time low at 8.5% as compared to 15% during 2010-
11.
CHANA & YELLOW PEAS
Yellow Peas
Yellow peas are used as substitute for chana and are also used for blending in flour industry. The demand for
yellow peas is met by imports from France, Ukraine, Russia and Canada. New crop shipments are expected during
August and September. As per trade sources during 2012-13 imports in India is expected to be steady as that of
2011-12 estimated imports of 1.6 mn tons. This is because the exporting countries like France could increase their
domestic consumption for yellow peas due to high global meal prices. Significantly high prices for edible oil meal
across the globe are seen due to production failure in Americas. South America is the largest supplier for soy meal
in the world. Such a shift in demand could be seen in India as well where currently the meal prices for all the oil
seeds are at record high. We could see some shift towards yellow peas for cattle feed and poultry feed.
Ratio and Spread Analysis
April- March 2008-09 2009-10 2010-11(e) 2011-12(f)
Opening stock 1.25 1.42 1.45 1.17
Production 7.08 7.47 7.53 6.32
Imports 0.20 0.34 0.10 0.20
Total Supply 8.53 9.24 9.08 7.70
Consumption 7.01 7.58 7.73 7.04
Exports 0.10 0.20 0.18 0.06
Total Demand 7.11 7.78 7.91 7.10
Ending Stocks 1.42 1.45 1.17 0.60
stock to usage in % 20.05 18.66 14.82 8.46
SUPPLY -DEMAND
in Million tons
Source: KCSL Research, GOI & DGFT
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During November 2006 the spread as well as the ratio between chana and yellow peas was at its peak at 1899 and2.5 respectively. During this time we saw a decent correction in chana prices due to shift in demand for cheaper
substitute like yellow peas. This year as well we have seen a
similar pattern however with a twist. While the spread has
breached previous high and is near 2000 the ratio is still at
1.8. This disparity is because the demand for chana is rising
at a higher pace compared to yellow peas. As mentioned
earlier the ongoing weather concerns at USA are affecting
global meal supply leading to record prices for meal
internationally as well as in India. Hence, feed demand is
expected to shift towards cheaper substitutes like yellowpeas. Keeping the current supply and demand scenario for
chana in mind, the price for chana is expected to rise faster
as compared to yellow peas.
INTERNATIONAL
Australia
In Australia sowing begins in April-May and harvest begins during October-November. The supply and demand
balance for Australia is estimated to remain tight for year 2011-12.
As per STAT market research and ABARE the beginning stocks for2011-12 were down by 23% to 0.06 mn tons due to 10% decline in
production during 2010-11. The disruptions in production started
from year 2010-11 where the yield declined sharply by 39%
lowering the production to 0.46 mn tons.
In 2011-12 the production numbers were estimated slightly higher
by 5% to 0.48 mn tons however with the low beginning stocks the
total supply increased marginally by 1% in comparison with the
total demand which increased by 14%. Rise in total demand for the
commodity was mainly due to rise in exports to 0.49 mn tons, upby 10%. Lower production in India increased the demand for
Australian chickpea. Higher prices globally increased the sowing
intentions in Australia and the seed usage for 2012-13 is estimated higher by 95% to 0.04 mn tons. Ending stocks
are estimated sharply lower by 92% at 0.005 mn tons as compared to 0.066 mn tons during 2010-11. The stock to
usage ratio is estimated lowest below 1%. Currently the sowing is being carried out in Australia. High global prices
are expected to see higher Chickpea acreage in Australia. However, looking at the vagaries in weather across the
globe yield remains uncertain. The weather conditions in key producing region of Queensland and northern New
South Wales have to be closely monitored as the crop enters the growing stage during coming days.
2010-11 2011-12
Carryin 0.86 0.67
Production 4.62 4.85
Total Supply 5.48 5.52
Exports 4.53 4.97
Seed 0.23 0.45
Feed and Other 0.05 0.05
Total USE 4.81 5.47
Ending Stocks 0.67 0.05
Stock to Usage 0.14 0.01
SUPPLY-DEMAND in million tons
Source: KCSL Research & Forecasts by STAT Market
Research based on data from ABARE
0.0
0.5
1.0
1.5
2.0
2.5
3.0
0
500
1000
1500
2000
2500
Jul-05
Nov-05
Mar-06
Jul-06
Nov-06
Mar-07
Jul-07
Nov-07
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Chana & Yellow peas absolute spread and ratio
spread ratio
Source: KCSL Research & NCDEX
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KCSL Chana Quarterly Report Please see the disclaimer on the last page 7
Tanzania
Tanzania is the upcoming destination to cater global
demand for chickpeas. The production trend in the
country is rising at a steady pace since last 5 years at a
CAGR of 5%. And as per trade sources the production
prospects for 2012 is estimated higher by around 15-
20% as compared to last years production of nearly
0.038 mn tons. Rise in production could lead to higher
exports to India during 2012-13. India has been major
destination for Tanzanian exports since last 5 years.
Out of total imports in India Tanzania contributes to
nearly 15-17% and India contributes roughly around
50-60% of Tanzanias exports during 2010-11.
FUNDAMENTAL OUTLOOK FOR NEXT QUARTER
PRICE OUTLOOK
At the futures platform we expect the prices to test Rs.5400-5450 on the higher side while prices could seek
some support near Rs.4450-4500.
After analyzing the supply and demand situation in domestic and international markets KCSL Research expects the
prices to rule firm and the bull rally could extend for one more quarter, before the fresh supplies are infused.
In India the peak arrival season has come to an end and the supply pressure has receded. The demand is being
catered mainly by the stocks and imports. Higher MSP, better price realization from commodities and profits from
commodities like Guar has increased the holding capacity of the farmers and traders. Stockiest are in no hurry to
liquidate the Chana inventories in anticipation of higher price.
Imports are expected from Euthopia and Tanzania during August and September. As per trade sources the
quantity is expected to be small nearly 20000-30000 tons. Major imports are expected from Australia during
November and December. Weather uncertainties will keep the Australian crop uncertain.
On the demand front, domestic demand for chana will remain robust due to the busy festive season in next
quarter. Also during the monsoon season demand for fried food remains high were gram flour is used largely.
Risk to this base scenario remains that the prices for Chana are trading near its record levels. Being an essential
commodity this has attracted the governments attention. Fear of ban on futures trade or any measure like
implementation of stock limits could arrest the price rally for short term. But the demand and supply situation
remains tight and the ongoing weather concerns could keep the sentiments in the market bullish.
25000
27000
29000
31000
33000
35000
37000
39000
Tanzania Production in tons
Source: FAO
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TECHNICAL OUTLOOKNCDEX Chana Monthly Chart
Source: Telequote
A Channel breakout (R, S) can be seen on the NCDEX Chana Monthly chart with higher top and higher bottom
formation on it. The breakout was so significant that price rallied breaching the previous top of Rs 3345 and made
a new life time high of Rs 4850. Currently price is trading firmly and heading towards the strong resistances and
next level of Rs 5300 5400. The near term support is at Rs.3948 level (Break out). Until the support is breached
buying on dips is advisable. RSI is also firm and holding near the overbought position. Any decline will be a good
opportunity to buy. Only when price breaches the support of Rs.3948, bearishness trend would start.
Strategy- Buying near supports is advisable for the target 5300, then 5400.
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Prerana Desai
VicePresident- Research
Dharmesh Bhatia
AVP Research- Technical Analyst
Faiyaz Hudani
Sr. Research analyst- Spices, Grains
+91-22-66528837
Amit Sajeja
Sr. Research analyst- Technical Analyst
+91-22-66528847
Sudha R. Acharya
Research analyst- Edible Oil, Pulses
+91-22-66528809
Madhavi Mehta
Research analyst- Energy, Bullion
Ajay Baheti
Associate Research- Technical Analyst
+91-22-66528845
Priyanka Jhaveri
Research analyst- Base Metals
+91-22-66528848
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