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Plentiful rain in July after two consecutive bad years augurs well for Urad Kharif sowing operations and also sets the stage for a rebound in the agriculture component of GDP.
The latest update from the agriculture ministry shows that the area sown for Pulses such as Tur, Urad and Moong is 34% higher.
If all goes well for the rest of this Kharif, this should lead to bumper crops, particularly for Tur and Urad, reduce import dependence and substantially cool inflationary impulses in these commodities.
Kharif sowing data suggests that farmers have been proactive in reading both policy and market signals this year.
Tur and Urad, which were the target of sharp buffer stock as well as Minimum Support Price (MSP) increases, have visibly gained acreage at the cost of Sugarcane and Cotton, which saw a market glut and modest MSP hikes.
To incetivise farmers to continue to grow Urad, timely procurement is needed so that prices do not plunge below the promised MSP.
Urad prices have been declining on expectations of good production in the current Kharif season and expected to trade lower in the days to come. However, festival season in September-October may help Urad prices to recover.
Urad prices as on July 12 for FAQ and SQ varieties was about Rs.10500 and Rs.10900 respectively, but now it is selling at Rs.9700 and Rs.10000 per 100 kg.
Urad could turn out different for Indian state of Madhya Pradesh (MP) which is one of the highest producing states. MP has seen 10.02 lakh hectares planted to Urad this time, up from 8.31 lakh hectares last year.
High prices of Urad varieties have been a constant point of worry for consumers and governments over the past year. While consecutive years of deficit rain cut supplies, leading to higher imports and a spike in prices, what went unnoticed is the divergence between retail and wholesale prices, raising the question if retailers are responsible for jacking up prices.