Indian farmers hold on to groundnuts hoping for better prices from government

A bumper crop in India’s western Gujarat state has led to a steep fall in prices of groundnuts, pushing the farmers to hold on to stocks in hopes that the government will buy it at the minimum support price (MSP) that is higher than the market price.

This, in turn, has led to a shortfall of raw material for oil mills, a newspaper report said.

The state government is acquiring groundnut at Rs 4,500 per quintal against a market price is Rs 3,500 per quintal.

Announced by the government in October last year, the procurement will be done in a staggered manner. Till now, the government has acquired nearly 68,000 tonnes of groundnut, with Deputy Chief Minister Nitin Patel reiterating its decision to continue with the procurement.

Moreover, the government is expected to continue procurement, albeit in a staggered manner. Yet, farmers are reluctant to sell the groundnut to oil mills, leading to hiccups in raw material sourcing for the mills. According to industry sources, farmers are holding on to their produce in the hope it will be procured at a higher rate by the government.

The Solvent Extractors Association (SEA) has estimated the kharif groundnut production in Gujarat this year is a record of sorts, at 3.14 million tonnes. In the last kharif season, it was 2.94 million tonnes. Of this, roughly 50 per cent of produce has already been sold in the market by relatively small farmers who didn’t have enough holding capacity.

This bumper crop has been cultivated despite the acreage under groundnut production in the state going down marginally to 1.6 million hectares, from 1.64 million hectares last year.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He also advises companies on thought leadership imperatives.

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