WHOLESALE PRICE VARIABILITY OF RAW AND PROCESSED PULSES - A CASE STUDY

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1 Legume Res., 36 (5) : , 2013 AGRICULTURAL RESEARCH COMMUNICATION CENTRE / indianjournals.com WHOLESALE PRICE VARIABILITY OF RAW AND PROCESSED PULSES - A CASE STUDY Purushottam*, Prasoon Verma, C.S. Praharaj and V.K. Kanaujia Indian Institute of Pulses Research, Kanpur , India Received: Accepted: ABSTRACT A case study was undertaken for Kanpur mandi during to ascertain the extent of wholesale price fluctuation of various types of raw and processed pulses. Inter-seasonal price variations in wholesale market were analyzed. The results showed maximum price variability in chickpea (14.49%) followed by fieldpea (12.49%) and mungbean (8.56%). Further, the seasonal pattern depicted that the prices of rabi pulses fall during March- June due to arrival of fresh stocks following crop harvest. To the contrary, the price of kharif pulses collapse during July-August and improve during December- January. Similar to raw pulses, the wholesale price variability of processed pulses as dal was at its highest in chickpea (14.36%), followed by fieldpea (12.12%) and mungbean (8.46%). The price of raw pulses and dal almost goes together as these were positively correlated in case of pigeonpea, lentil and fieldpea except for mungbean. The average market price was the higher for urdbean and mungbean followed chickpea, pigeonpea, lentil and fieldpea. It was also found that average price difference between raw pulses and processed dal was 27.15%, ranging to 41.66%. The average price ( /kg) differences among various dal grades were the highest in pigeonpea (7.28%), followed by urdbean, mungbean and lentil 4.65, 4.44 and 0.17%, respectively. The study revealed maximum price variability in chickpea, followed by fieldpea and mungbean for both raw and processed pulses. Considerable price difference was also observed between raw and processed pulses as well as among dal grades. Key words: Price variability, Pulses, Seasonal trend, Wholesale price. INTRODUCTION In India, pulses are the second major source of dietary protein (27%) after cereals (55%) and also in comparison to share of animal protein (18%) (Ali, 2003). Pulses are mostly consumed in the form of dehusked splits, commonly known as dal and it is estimated that about 75% of pulses produced are processed for making dal (Lal and Verma, 2007). The country is largely deficit in pulses and chronic demand-supply imbalance for most of the pulses continues unabated over past few decades. With limited price elasticity, price of pulses tends to be highly sensitive to supply-shortfalls (Anonymous, 2007) and prices of domestic pulses often vary on a daily basis. The prices also fluctuate widely on seasonal or annual basis as a consequence of changes in pulses production. Sharp fluctuation in wholesale prices of individual pulses were observed * Corresponding author s e- mail: purushottam1995@yahoo.com in Delhi market during a year (Brouwer, 2000). In addition, pulses are also exposed to high risk due to high fluctuation in prices. Steep rise in price of pulses spills over to other sectors of economy and lead to increase in overall rate of inflation. More pertinent affect of change in prices can have marked (favourable or detrimental) to influence decision of farmers on sowing of pulses crop, i.e. which crop and how much area to be sown. Efficient marketing, thus, helps farmers i n planning production in accordance with the need of economy. This work is carried out through the price signals. In fact, market is one of the first considerations to develop any production strategy, applicable especially for a pulse crop. Moreover, based on experience farmers could have some predetermined notions and anticipations about potential market prices.

2 430 LEGUME RESEARCH Therefore, information on market intelligence can be of immense help in more than one way. For example, seasonal price pattern can be used to establish deadline for selling of a pulse commodity, timely disposal of produce will reduce the storage cost. Assured market support will help in sustainable improvement in production of pulses. More area under pulses in the long run is likely to be dependent upon favourable price regime with more stability and less price variability. Presently, pulse producers sell the raw produce at the various primary or secondary wholesale markets existing in different states. Numerous channels or layers exist in market chain between farmers to consumers in form of broker, wholesaler, miller for raw grain and again miller, wholesaler, broker and retailer are involved in the trade of processed dal. Each intermediary or agent typically charges a margin of 1-1.5% above transportation, handling, storage and processing costs (Gregory et al., 2003). It has also been reported that the graded large sized chickpea dal fetches premium price in the market (Patel et al., 2006). Prepackaged pulses, though in small portion (about 10-20%), are used for urban market, but have negligible share in rural consumption (Gregory et al., 2003). This sector, can further be exploited to enhance income of farmers. Another concern in price variability is post harvest storage and value addition. Farmers often sell the pulses produced without any grading, processing or value addition. This leads to lesser profit margin to the pulse growers. By adopting the simple know-how of grading, processing and packaging of pulses at rural threshold, farmers can realize better prices for the produce. This will further help in checking wholesale and retail price variability in raw and processed pulses. Thus, marketing price structure is often a constraint in further expansion of pulses (in terms of area and production) and wide gap between farm gate price and retail price is observed. Keeping market trend in view, the present study was undertaken to find out wholesale price variability of various types of raw and processed pulses over a year along with wholesale price difference between raw and processed pulses and price variation in dal grades in Kanpur mandi, which is one of the largest pulse trading markets of India. METERIALS AND METHODS Before detailing out the price variability and its analysis with reference to food grains (pulses) trade, it is pertinent to be familiar with wholesale trade in India. The wholesale trade in food grains is handled by around two million private wholesalers, besides FCI and cooperatives in India (Acharya, 1998). The Department of Food & Civil Supplies of the respective state governments issues licenses to wholesalers who can stock up to 200 tonnes of pulses. Wholesale markets of pulses exist throughout India where domestic channels supply pulses to retailers. Actual buying and selling of commodities at wholesale level takes place in market yards and sub-yards specially created for the purpose. Wholesale market may thus be defined as a market situated somewhere between farm-gate and retail market, usually handling large quantity of sales for further stage of distribution of the commodity. Wholesale price accordingly is the rate at which a relatively large transaction, generally for further sale, is effected. Kanpur Nagar district have four mandies located at Kanpur, Baripal, Choubepur and Uttari pura. These mandies have essenti al infrastructure, daily market price, monthly arrivals and disposals stocks etc. The Kanpur mandi have good infrastructural supports such as shops, platforms, godowns, supermarkets, better arrivals/ sell offs and is thus, recognized as important pulse trade market in the state of Uttar Pradesh. Therefore, this study was conducted for Kanpur mandi involving important pulse commodities like chickpea, pigeonpea, lentil, fieldpea, mungbean and urdbean. The wholesale price data on the above selected raw as well as processed pulse commodities was collected continuously for 13 months from secondary sources published in newspapers during March 2006 to March The data for individual days of the months were used to calculate monthly average of wholesale prices. Thus, daily market price of 15 to 27 days in a month with total of 273 days were first recorded and subsequently analyzed. In the analysis process, the price range of individual day was averaged. The monthly averages, standard deviations and coefficient of variation were calculated for all six raw and processed pulse commodities. Coefficient of variation (CV) in price was used in the analysis as a measure/extent of price

3 variabi lity. Inferences were drawn through comparison of monthly prices of individual and total pulses in raw and processed form to know seasonal variability in prices. Further, the price difference between raw and processed pulses was also analyzed and information on grades of processed pulses was worked out. RESULTS AND DISCUSSION Seasonal variability in prices of raw pulses: The distribution of average wholesale price of raw pulses over the months at Kanpur mandi during study period showed maximum coefficient of variation in chickpea (14.49%) followed by fieldpea (12.49%) and mungbean (8.56%). Prices were comparatively stable for the remaining pulses viz., pigeonpea (5.90%), lentil (5.83%) and urdbean (2.85%). Thus, price variation ranged between 2.85 to 14.49%. The price fluctuations are combined effect of the several factors. Pulses are more sensitive to biotic and abiotic stresses including extremities of weather conditions. Sometimes the poor production performance not only create imbalance in demand and supply of pulses, but also resulted into soaring import bills, unpredictable price rises and low net profit compared to competing crops (Joshi and Saxena, 2002). Comparison of variations in the prices of some selected commodities showed that the price fluctuations are generally higher in case of coarse cereals, groundnut in comparison to rice and wheat (Sharma and Kumar, 2001) which showed price variability due to both preference and demand for different commodities. In case of pulses, the average wholesale prices (/kg) were observed as 23.64, 18.98, 17.85, 13.77, and for chickpea, pigeonpea, lentil, fieldpea, mungbean and urdbean, respectively (Table 1). Thus, market price of pulses in ascending order can be arranged as fieldpea, lentil, pigeonpea, chickpea, mungbean and urdbean (green followed by black). The average price was the highest for urdbean and the lowest for fieldpea. High annual fluctuations in price of pulses in contrast to other commodities indicated high inherent risk in pulse production. This might have Vol. 36, No. 5, turned the farmers away from pulses, in favour of other competing stable crops like wheat, rice and sugarcane. It was reported that lack of assured market, ineffective procurement policy of government, unfavourable match in prices and trade li beralization make pulses cultivation less remunerative and appealing compared to other crops (Joshi et al., 2002; Ramesh, 1999). Pulses prices also exhibited high interseasonal variations in a year. Seasonal variability of raw pulses over the months showed that the lowest wholesale price of rabi pulse crops (like chickpea) was during March-June. Conversely, these were highest during September-October. To the contrary, the kharif season crop i.e. pigeonpea fetched lowest price in July-August and the highest in the months of December-January. Similar to chickpea, lentil prices were also lower in March-April and higher in September-October. The lowest prices of fieldpea were observed in March-April and highest in September-October. However, the lowest prices of urdbean were recorded in March, April, July, and January and higher in September-October. The lowest price of mungbean found in July-October and highest in May-June, December, and January (Fig.1). Thus, pulse commodities exhibited cooling down of prices at arrival of fresh harvest in market since the prices are closely linked to the annual nature of crop cycle. Analysis of five years price trend of chickpea at Indore market revealed that the prices were on increasing trend from June to September, while it started falling from November, with the lowest FIG. 1: Seasonal variability of wholesale price of raw pulses ( ). TABLE 1: Average wholesale price (Rs/kg) and coefficient of variation of major raw pulses. Component Chickpea Pigeonpea Lentil Fieldpea Mungbean Urdbean Average S.D C.V. (%)

4 432 LEGUME RESEARCH prices being reported in March and April due to supply pressure (Gregory et al., 2003). Therefore, the regulatory authority including vari ous Government agencies should actively intervene in the marketing of pulses at regional and national level. Thus, procurement of pulses during harvesting season of pulses at the support/procurement prices and channelizing the produce through Public Distribution System (PDS) would necessarily protect the interest of both the producers and the consumers (Maji and Sulaiman, 1995). Prices of rabi pulses as chickpea, fieldpea, lentil lowered during March-June due to arrival of fresh stocks. Low prices of urdbean were also recorded (Fig 1) during March, April, July, January and higher in September-October. Similarly, prices of mungbean were low during July-October and higher in May, June, December and January. Seasonal variability in prices of processed pulses: Similar to raw pulses the average wholesale price variability of dal as processed pulses over the months was the highest in chickpea (14.36%) and fieldpea (12.12%). Low variability indicates the stability in prices, therefore, mungbean (8.46%) and lentil (7.60%) were found reasonably stable. However, maximum stability (with lowest variability) was observed in case of pigeonpea (5.63%) and urdbean (3.92%). Thus, coefficient of variation (CV) of processed pulse (dal) prices ranged from 3.92 to 14.36%. Prices of pulses in the month of March were found to be the lowest and generally high during September-October. The average wholesale prices (/kg) recorded for dal in ascending order as 15.18, 22.10, 25.41, 30.49, and for fieldpea, lentil, pigeonpea, chickpea, urdbean and mungbean, respectively (Table-2). Further, the study on seasonal variability showed that the lowest price of chickpea dal during the month of March-April and was the highest during September-October. The lowest prices of pigeonpea dal were recorded in July-August and the highest in February-March. However, March and April were observed to have the lowest prices in case of fieldpea dal, and it was more in subsequent months. Lentil prices were the lowest in March and July and high in September-October. Prices of mungbean dal were the lowest in March and July and the highest in May, June and December while the lowest prices of urdbean dal were during March-April and the highest in September-October (Fig 2). It is also noted that not all price variations are problematic especially when prices move along a smooth and wellestablished trend reflecting market fundamentals or when they exhibit a typical and well known seasonal pattern. However, variations in prices become problematic when it is large and cannot be anticipated, and as a result, it creates a level of uncertainty that increases risks for producers, traders, consumers and governments resulting in suboptimal decisions. Variations in prices that do not reflect market fundamentals are also problematic which leads to incorrect decisions (FAO and OECD, 2011). The wholesale price relationship between raw and processed pulses as dal showedthat the prices of raw and processed pulses were strongly (significantly)positivelycorrelatedoverthemonths in case of pigeonpea, lentil and fieldpea. Thus, when raw prices went down, dal prices also became cheaper. Similar was the case for both chickpea and urdbean prices except that for mungbean (correlation was not significant) Table 3. FIG 2: Seasonal variability of wholesale price of pulses dal ( ). TABLE 2: Average wholesale price ( /kg) and coefficient of variation of pulses dal. Component Chickpea Pigeonpea Lentil Fieldpea Mungbean Urdbean Average S.D C.V. (%)

5 Vol. 36, No. 5, TABLE 3: Wholesale price ( /kg) relationship between raw pulses and dal. Months Chickpea Pigeonpea Lentil Fieldpea M ungbean U rdbean Raw dal Raw dal Raw dal Raw dal Raw dal Raw dal March Apri l May June July Aug Sept Oct Nov Dec Jan Feb March (r) value * * * * * ** NS * * *Significant at 5 per cent level (0.5529) of significance, **Significant at 1 per cent level (0.6835) of significance, NS = Non-significant Price differences in raw and processed pulses: From the price comparison between raw and processed pulses (dal) it was observed that in fieldpea the difference was minimum ( 1.41/kg) whereas it was maximum in mungbean ( 12.31/kg) (Table 4). The processed pulses are costlier than raw pulses. Average price difference between raw pulses and processed dal remained at 6.49/kg (27.15%) ranging between 1.41 to 12.31/kg (minimum 10.24% with fieldpea to maximum 41.66% with mungbean). This price difference is due to involvement of procurement, processing and marketing network. It also depends upon processing cost which varies depending upon milli ng characteristics of pulses. Due to presence of thin gum layer between seedcoat and cotyledon, lentil, chickpea and fieldpea come under easy-to-mill pulses, whereas in case of pigeonpea, mungbean and urdbean seedcoat is tightly attached with cotyledons, hence, come under difficult-to-mill kind Pulse Commodities Price of raw pulses ( /kg) of pulses. Similarly, the recovery of dal also varied with the species of pulses concerned (68-75 % in pigeonpea, 78-82% in chickpea and % in fieldpea) Lal and Verma, Grades of pulse dal and price variation: Processed dal is available in wholesale market in different grades. There were three grades of dal in pigeonpea viz., pigeonpea phool, pigeonpea special and pigeonpea 1.5 number. Further, urdbean is marketed in form of whole grain urdbean (black and green) and urdbean dal with and without husk (dhova). Mungbean is also sold whole and split with and without husk. In case of lentil it is sold as whole grain, dehausked dal and dehusked whole (malka masoor). Pulses like chickpea and fieldpea dal do not have any kind of grading. The average price ( / kg) differences among various pulse grades were higher in pigeonpea followed by urdbean, mungbean and lentil with the values of 7.28, 4.65, 4.44 and 0.17%, respectively (Table 5). Pulses are marketed TABLE 4: Price differences of raw pulses and pulses dal (based on average prices). Price of dal ( /kg) Price difference of dal and raw pulses ( /kg) (%) Pigeonpea Chickpea Lentil Fieldpea Mungbean Urdbean Average

6 434 LEGUME RESEARCH Processed dal grades TABLE 5: Grades of pulse dal and price variation. Average price ( /kg) Average price difference within grades ( /kg) Mean Pigeonpea phool Pigeonpea sp Pigeonpea Base Price Mungbean dal Mungbean dhova Base Price Lentil Lentil malka Base Price Urdbean black Urdbean green Urdbean dhova Base Price Chickpea - No grade No grade Field pea - No grade No grade as a raw whole as well as dehusked split products. Cleaned and well-graded whole grains usually fetch higher prices. The observations also showed that raw pulses are available in less number of grades in comparison to dal. The major raw pulses are available in the name of chickpea, pigeonpea, lentil, fieldpea dara and fieldpea farm, urdbean black and urdbean green and mungbean. Thus, similar to processed dal, it can be inferred that if raw pulses can also be categorized into several grades (either on the basis of seed size or seed weight), the farmers can earn more farm income in terms of profit from the produce. With the change in shopping pattern, a new class of consumers with preference to prepackaged whole grains has emerged. The present study on price fluctuation of raw and processed pulses over a period of one year (13 months) was taken to develop understanding of peak selling prices of raw and processed pulses (dal), so that farmer could plan to sale to get maximum value for his produce. The highest wholesale price variability was found in chickpea followed by fieldpea, mungbean, under both of raw and processed pulses. Prices were comparatively stable for pigeonpea, lentil and urdbean. The average market price was the higher for urdbean and mungbean followed chickpea, pigeonpea, lentil and fieldpea. Usually raw pulse prices decreased with the new arrivals and increased during lean season. Therefore, farmers can store the produce to sale at appropriate time. Government may also help in creation of storage facilities at gross root level. Further, when raw prices of pigeonpea, lentil and fieldpea wentdown, dal prices also became cheaper but it was not in case of mungbean. The selling of processed pulses in form of dal was found to be remunerative as processed pulses gave an average gain of 27% over raw produce. The average price differences among various grades of processed dal were found the highest in pigeonpea followed by urdbean, mungbean and lentil. Thus the processing of pulses at rural threshold will augment rural employment and income opportunities to pulse growers. The value addition can also help farmers in better remuneration to their pulse produce. Therefore, it is suggested to generate adequate awareness and knowledge on marketing aspects among pulse growers in rural area. REFERENCES Acharya, S.S. (1998). Agriculture marketing in India: Some facts and emerging issues. Keynote paper, Indian J. Agric. Econ., 53: Ali, N. (2003). Pulses research and development in India: An overview. Proc. summer school on post harvest technology & value addition in Pulses, IIPR, Kanpur June 12-21, Pp.1. Anonymous (2007). Prices and food management, the economic survey Ministry of Finance, Govt. of India. FAO and OECD (2011). Price volatility in food and agricultural markets: policy responses. ( tratope/agrice/reportg).

7 Vol. 36, No. 5, 2013 Brouwer, J.B. Sharma, B. Malic, B.A. and Hill, G.D. (2000). Asia -Pacific: Meeting the challenges (R. Knight) eds. In. Linking research and marketing opportunities for Pulses in 21 Centuries. Pp Gregory, K., Price Rip, Landes and Govindan, A. (2003). India s pulse sector: results of field research, WRS , USDA. Pp Joshi, P. and Saxena, R. (2002). A profile of pulses production in India: Facts, trends and opportunities, Indian J. Agric. Econ., 57: Joshi, P.O. Askan, P.K. Datta, R. and Kumar, P. (2000). Socio-economic constraints to legumes production in rice wheat cropping system of India, In Eds. C. Johansen, S.M. Duxbury, S.M. Virmani, CLI Gowdra, S. Pande and P.K. Joshi. Lal, R.R. and Verma, Prasoon (2007). Post harvest management of pulses, Technical bulletin, Indian Institute of Pulses Research, Kanpur. Pp. 46. Maji, C.C. and Sulaiman, R. (1995). Policy paper based on production prospects and constraints to raising productivity of pulses in Madhya Pradesh. ( /policy_paper/pp2.pdf). Patel, S. Anita, B. and Rao, S.K. (2006). Milling quality in desi chickpea. Indian J. Pulses Res. 19: 145. Ramesh Chand (1999). Liberalization of agricultural trade prices and net social welfare- a study of selected crops. Economic and political weekly 34 (52) Pp. A 151 Sharma, Anil and Kumar, Parmod (2001). An analysis of the price behaviour of selected commodities. National Council of Applied Economic Research, New Delhi. Pp. xv ( 435