India: Barley prices may slip to 7-year low

There seems to be no end in sight to the slide in barley prices over the past six months in India. Next month, prices are set to fall another 10-12% to a seven-year low of 1,090-1,100 rupees per 100 kg, Cogencis reported on July 22.

Weak demand, especially from malt makers, due to the nationwide lockdown to stem the spread of the novel coronavirus, high domestic stock, and delayed imports have come together to drive prices to multi-year lows.

In the benchmark market of Jaipur, barley is currently quoted at 1,250 rupees per 100 kg.

The decline in prices has been relentless, with a fall of 70-80 rupees in the last fortnight alone. This is a far cry from a decade ago, when prices of the coarse grain had hit a record high of 2,175 rupees per 100 kg. A year ago, barley was being sold at 1,825 rupees per 100 kg.

Tracking the weakness in the benchmark market, barley contracts on the National Commodity & Derivatives Exchange are likely to extend their fall in the next four-five weeks, and may trade at 1,300-1,350 rupees per 100 kg, analysts said. Today, the most-active August contract was at 1,400 rupees per 100 kg.

Chandra Bhan, owner of the Jaipur-based Rudra Enterprise, said demand from bulk buyers, domestic stockists, and malt makers remains muted. He added that malt companies, which account for over half the demand, are slowing down purchases as the quality of grain in the market is too poor for brewing. Additionally, these companies already have ample stock at a time when operations have significantly slowed down.

Availability of excess stock could also weigh on prices. Stocks of the coarse grain have piled up as the lockdown was announced after arrivals of the new crop hit the market, said Mahesh Ghiya, owner of the Jaipur-based Swastik Broker. Demand has come to a standstill for around three months now, he added.

Malt makers and the feed industry account for a major chunk of barley consumption. On an average, annual demand from malt makers for domestic barley is 600,000-700,000 tn. They import 40-50% of their coarse grain requirement due to better quality and lower prices, trade sources said.

This year, however, demand from domestic malt makers has declined 25-30%. Compounding the supply glut, imports of around 63,000 tn, which were scheduled to arrive from France in March, landed in May.

Prospects of demand from the domestic poultry industry also look grim. Weak demand due to the lockdown forced many farmers to shut shop, while others resorted to culling birds to trim losses.

"Average annual demand from the feed industry is around 200,000 tn. Demand mostly rises during summers as it has cooling properties and is one of the cheapest feed available," said Munna Samodiya, owner of Bansal Trading based in Jaipur.

Production of broiler chicken is 40% lower than in 2019, while that of egg is down 20%, an official at the Maharashtra Poultry Breeders Welfare Association said. With the ongoing holy month of Shravan, when most Hindus stop consuming meat and eggs, ending in late August, demand from the feed industry may dip further.

India's barley output in 2019-20 (Jul-Jun) is expected to be 2.10 mln tonnes, up from 1.63 mln tonnes a year ago, according to the Ministry of Agriculture and Farmers Welfare’s third advance estimates.

Hope of a revival in prices by Diwali has also been dampened by the higher output estimates. The onset of winter generally leads to higher demand for poultry products and, in turn, barley purchases by the feed industry. Earlier, stocks in the market would get exhausted by Diwali, which supported prices.

If the situation continues to be the way it has been for the past few months, demand from major sectors remains lacklustre, and supply is ample, traders will have little to look forward to.

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