COVID19: Agri-Commodities Take a Hit on Labour, Logistics Woes, says CRISIL
Moneylife Digital Team 23 April 2020
There has been a sharp decline in arrivals of agri commodities in the first two weeks of April, mandi prices of vegetables, pulses and rabi crops have increased sharply, while rates of fruits, paddy and fibre crops have shown a significant decline, says a research note.
 
In the report, ratings agency CRISIL says, "While there are four primary reasons for the sharp decline in arrivals – delayed rabi harvest, labour shortage, lack of transport, and reduced mandi operations – grains are also said to be hoarded by farmers and traders to be sold at a later date when mandi operations and logistics normalise."  
 
"But in the case of perishables such as fruits and vegetables, farmers are bearing the brunt of the crash in demand because of the lockdown. Exports of grapes and mangoes are also halted. The upshot is that prices of fruits are 10% lower domestically despite an 85% fall in arrivals," it added.
 
 
Mandi arrivals across commodities declined 68%-99% during 1st and 12 April 2020 due to delayed rabi harvest, labour shortage, lack of transport and reduced mandi operations.
 
Mandi prices of fibre crops and paddy and coarse grain declined 31% and 2%, respectively, in the first 12 days of April, even though arrivals dipped 99% and 68%, respectively. "Mandi prices have logged a sharp decline despite significantly lower market arrivals due to lower domestic and export demand for cotton crop," the report says. 
 
In case of fruits, CRISIL says, mandi prices have declined due to lower exports of seasonal crops, such as mango and grapes, and limited domestic offtake amid the lockdown.
 
The report indicates increase in consumption of pulses during the lockdown. Increase in demand has raised mandi prices 28% this month. Higher demand has also increased hoarding that has too kept the prices up.
 
The case is similar for vegetables, the ratings agency says, adding mandi prices have shot up 83% during first 12 days of April. "Mandi prices (of vegetables) have increased sharply on-year as arrivals have plunged due to restricted market access to farmers. But middlemen estimated to be procuring at much lower prices from farmers given their limited bargaining power due to perishable nature of commodities," it added.
 
In case of rabi crops, primarily wheat, delayed harvesting due to labour shortage has pushed up prices by up to 29% at mandis. But projections of a bumper output, lower industrial demand and limited exports were likely to exert pressure on wheat prices, the ratings agency says.
 
The case for paddy and coarse grain, however, is different where arrivals have fallen due to curbs on inter-state movement of goods and non-availability of logistics partners. Also, decline in industrial and animal and poultry feed demand for coarse grain is estimated to have led to a decline in mandi prices.
 
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