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Commodities – Economic Times

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NEW DELHI: The government decision to increase the minimum support price (MSP) of crops has led to an upward movement in the price of agriculture commodities, particularly maize, rice, bajra, moong, tur, cotton and soya bean, said traders and analysts. They expect prices of pulses and cotton to rise further.

The MSP generally sets the floor and wholesale prices remain above it, said Sunil Kumar Sinha, principal economist at India Ratings & Research. How much the prices exceed the MSP will depend on actual demand and supply in the market and government intervention.

In the past week, the price of maize in the physical market increased to Rs 1,260 per quintal from Rs 1,210, and that of rice to Rs 6,300 from Rs 6,100, said Anuj Gupta, deputy vice-president of commodities research at Angel Commodities Broking.

Bajra prices have also increased to Rs 1,260 a quintal from Rs 1,210. Among pulses, moong whose MSP was hiked by 25%, has already seen a Rs 3 jump in price to Rs 53-54 a kg in the Indore wholesale market. Tur dal prices increased from Rs 36 a kg to Rs 38.

“We expect prices to remain bullish for now,” said Suresh Aggarwal, president of the All India Dal Mills’ Association based out of Indore. When the 2017-18 MSP was set at Rs 5,575 per quintal for moong, the average wholesale price was Rs 6,658, said Sinha of India Ratings.
Commodity prices begin to rise on higher MSP

“Therefore, now that the MSP for 2018-19 has been increased to Rs 6,975 per quintal, it will translate into wholesale price of moong going beyond this level,” he said, explaining how the MPS influences market rates.

Cotton prices have also increased to Rs 4,800 a quintal from Rs 4,600 with sellers not active in the physical market post the MSP announcement on July 4, said Gupta. “They stopped selling due to expectation of higher prices. Heavy rain in Maharashtra also impacted the supply. However, buyers are active to maintain their stocks and inventory,” he said.

Supported by higher MSP, soya bean prices too saw an increase, said Davish Jain, chairman of the Soybean Processors Association of India.

“This has not impacted sales and demand from edible oil, poultry feed and industry is picking up compared to the April-June quarter,” he said, adding that export enquiries for October delivery were also coming.

To ensure framers a 50% return on their cost of farming, the government raised the minimum support price of paddy (by 13%), jowar (42%), bajra (37%), ragi (52%) and maize (19%) for this season.