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Wide Swings in Prices

Wide Swings in Prices Nishter WHAT is one to make of the recent wide swings in spot groundnut oil prices? From the all-time high of Rs 5,875 (per tonne) recorded early in the second week of September, the spot quotation for groundnut oil (in Bombay) declined gradually to Rs 4,750 on September 28. It again soared to Rs 5,575 on October 3, but fell sharply to Rs 4,850 on October 6. The decline from Rs 5,675 to Rs 4,750 was partly a correction of the temporary price distortion consequent to dislocation of supplies caused by the excessive rains and floods in the neighbouring Gujarat State; partly it also reflected a change in market psychology induced by the assured prospect of a record groundnut crop this season. The sudden spurt to Rs 5,575, which took almost every one by surprise, would seem to have been caused essentially by the temporary excess of seasonal demand over somewhat reduced supply. This incidentally serves to highlight the very sensitive nature of the commodity. Apart from being an important item of daily consumption, groundnut oil is also held in high esteem by speculators whose activities reach far beyond the narrow limits of the recognised futures markets. The renewed weekend setback, bringing down the spot quotation to Rs 4,850, represents the seasonal phe- nomenon and the seasonal decline which is now getting under way can be expected to continue for quite some time. How the trend will progress is, of course, difficult to say, as it would all depend on the tempo of arrivals. The recent wide fluctuations in spot prices have had their impact on forward positions, though to a much lesser extent That the groundnut crop will set a new record this season is no longer in question, Differences relate only to its size, varyingly estimated between 62/63 lakh tonnes and 69/70 lakh tonnes (in shell), In view of the extremely unsatisfactory nature of crop reporting in the country, it is difficult to say how big the crop will actually turn out to be Uncertainty about the actual size of the crop continues in fact right up to the end of the season, little wonder that Government is never able to formulate effective and iatory measures to influence the course of prices. The need for a reliable agency for making quick estimates of major crops can scarcely be overemphasised.
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