COVID19: Agri-Commodities Take a Hit on Labour, Logistics Woes, says CRISIL
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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    Expensive metals, crude boom; gold touches new high
    Prices of gold, silver and crude oil surged on Wednesday on the Indian futures market MCX, following the rise in bullion and crude prices in the international market due to deepening military tensions between the US and Iran.
     
    In the domestic futures market, the price of gold rose to a new high, while in the international market, it is at an almost seven-year high.
     
    Gold in India's largest futures market, Multi Commodity Exchange (MCX), was trading at Rs 41,193 per 10 grams at 9.30 a.m. on the February expiry contract, an increase of Rs 530 or 1.30 per cent as compared to the previous price of Rs 40,946 per 10 gms that later jumped to Rs 41,278 per 10 grams.
     
    Silver was trading at Rs 48,661 per kg, up by Rs 550 or 1.15 per cent, from the previous session of the March contract. At the same time, in the January contract, the crude oil was trading at Rs 4,572 per barrel, up by Rs 78, or 1.74 per cent from the previous session. 
     
    Bullion has gained momentum in the international market due to deepening military tension between the US and Iran. In the international market, the price of gold crossed $1,600 an ounce on Wednesday which is a seven-year high.
     
    On Wednesday, gold on the international futures market COMEX was trading at $1,591.35 an ounce with a gain of $17.05 or 1.08 per cent in the February contract, while gold traded up on Comex to $1,612.95 per ounce during the previous trading, which is the highest after February 2013. On February 19, 2013 the gold rose to $1,617 an ounce.
     
    Silver was trading at $18.60 an ounce in the March contract of COMEX, up by 1.14 per cent from the previous session.
     
    The rise in gold prices is seen as a safe haven investment in the wake of geo-political tension in the Middle East. 
     
    On Wednesday, 10 rockets were fired at the Iraq-based Al Assad airbase, which has a large number of US troops, according to the Efe news. The attack comes after Iran's commander General Qasem Suleimani died on January 3 in a US drone strike, which is seen as a retaliation by Iran.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    NSEL Scam: SEBI Says Anand Rathi Commodities and Geofin Comtrade are 'Not Fit & Proper' Brokers
    Market regulator Securities and Exchange Board of India (SEBI) has declared Anand Rathi Commodities Ltd and Geofin Comtrade Ltd (formerly Geojit Comtrade Ltd) as 'not fit & proper' to hold, directly or indirectly, the certificate of registration as commodity derivatives brokers with immediate effect.
     
    In an order, Madhabi Puri Buch, whole time member of SEBI said, "Various courts and authorities in the country have made serious adverse observations against National Spot Exchange Ltd (NSEL) and paired contracts, observing the transactions to be violative of the Forward Contracts (Regulation) Act (FCRA) and to be in the nature of financing transactions that were violative of Maharashtra Protection of Interest of Depositors (MPID) Act. Even though these observations are yet to be established in a court of law, SEBI is justified in considering them when assessing the reputation of the parties concerned for the purpose of determining their fit and proper status since it is mandated with investor protection and in that context, it is justified in keeping a person with doubtful reputation out from the market rather than running the risk of allowing the market to be affected." 
     
    "Anand Rathi Commodities by virtue of being a broker, and by its own admission, has facilitated transactions in the paired contracts for its clients on the NSEL platform. This in itself establishes a close association between the brokerage on the one hand and paired contracts and NSEL on the other. Over and above this, Anand Rathi Commodities, by its own admission, allowed itself to become a channel and instrument for NSEL to promote paired contracts amongst its client," the order says.
     
    The order issued separately against Geofin Comtrade also mentions similar offences committed by the brokerage. 
     
    SEBI is probing as many as 300 brokers for violation of rules colluding with the National Spot Exchange Ltd (NSEL) to defraud investors. In fact, the regulator has named several brokerage firms in a first information report (FIR). 
     
    What this meant was that NSEL did not maintain sufficient underlying stock on trades it allowed even as brokers sold lucrative contracts to investors. This builds defaults and resulted in the exchange denying payments worth Rs5,600 crore in 2013. 
     
    On 6 October 2016, SEBI appointed designated authorities to enquire into alleged violations of various provision of SEBI acts by the brokers. The designated authorities submitted its enquiry report on 11 April 2017. 
     
    The Report found both Anand Rathi Commodities and Geofin Comtrade have carried out back-to-back pair contracts at NSEL for and on behalf of its constituents. "On behalf of its constituents, the brokers simultaneously entered into a ‘short term buy contract’ (for example, T+2 or two day settlement) and a ‘long term sell contract’ (T+25 or T+36 or settlement in 25 days or 36 days) with pre-determined price and profit for the buyer and seller, which itself violated the very concept of spot market for trading in commodities. The contracts were executed by the brokers in such a manner that it was always ensured that these contracts were registering a profit on the long-term positions. Thus, there existed a financing business where a fixed rate of return or assured returns were guaranteed to the investors of Anand Rathi Commodities and Geofin Comtrade, who had invested in these pair contracts. These paired contracts generated an assured return of 13% to 18% per annum, and therefore, in actuality, financial transactions were taking place through these pair contracts under the garb of doing commodities trading in spot market," the report had said. 
     
    In its order, SEBI says, "Given the close association of Anand Rathi Commodities and Geofin Comtrade to NSEL and the paired contracts, and the relatability of the same to the brokerage, the serious adverse observations of the various courts and authorities have, in turn, seriously eroded the reputation and belief in competence, fairness, honesty, integrity and character of the Anand Rathi Commodities and Geofin Comtrade. Reputation is an important factor for consideration of fit and proper critera and the reputation of the Anand Rathi Commodities and Geofin Comtrade have been seriously eroded. Thus, I find that both Anand Rathi Commodities and Geofin Comtrade are not a fit and proper person to be granted registration or to operate as a commodity derivatives broker."
     
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    COMMENTS

    Ajay Sharma

    2 years ago

    Is it just me? Or does anyone else have a major problem with SEBI being the one to dictate who is/not 'fit and proper'?

    AAR

    2 years ago

    Is there any action against Financial Technologies?

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