Potato Short Term Outlook - Karvy Comtrade

Potato Short Term Outlook
Review
Since beginning of the year 2011 potato prices
have witnessed continuous fall amid record
high production this year. Potato prices
started the year at 690 levels at NCDEX plat
form and after making a yearly high of 717.50
levels amid lean season demand. However,
from March onwards prices started declining
on fresh crop arrivals from North India. North
India contributes to more than 80% of the
total potato production of country. This season
potato production was estimated around 40
million tonnes against 35.88 million tonnes in
last season. The major reason for higher
production was increased acreage under the
crop due to previous year’s rise in prices. Thus,
offloading of huge stocks at spot market across
north India pressurized the prices.
Potato Price Movement at NCDEX (Jan- Sep 2011)
750
650
550
450
350
250
Sources: Bloomberg & KCTL Research
Price Movement at NCDEX (New Crop Contract)
650 NCDEX Futures Prices Spot Prices
600
550
500
450
400
350
March 2011 is new crop contract therefore,
it trading at higher levels. However, from
chart it is clear that spot prices are trading
below Rs. 450 per quintal. Major reason for
bearish trend in spot prices is huge stocks of
north Indian crop, which might have a
negative impact on March prices also.
Sources: Bloomberg & KCTL Research
Outlook
Potato prices are expected to trade range bound to down side biased in near term. As of now Karnataka crop
is coming to the spot market. However, Karnataka’s contribution is only 2% in total production. Sowing for
next season north Indian crop is likely to start from mid October onwards in major growing regions of Utter
Pradesh, MP, and Uttarakhand. Therefore, till then prices might trade in a range bound manner. As per market
sources, from total stocks around 15-20% has been used for sowing in Punjab, Haryana, still more than 40%
stocks are lying in colds storages in Agra and it’s near by regions. Thus, huge stocks of last season crop are

likely to keep prices under pressure. In Punjab, sowing for early crop has been completed so far and fresh crop
might hit the market November onwards which might further add to bearishness.
Technicals
Potato March 2012 NCDEX is trading in the price channel formation. The principle of Fibonacci projection
states that prices are witnessing resistance at 586 and 592 which are 38.2% & 23.6% respectively projection
of the range 614-572-601. We expect 592 levels (23.6%) should be crucial resistance and holds the price
channel upper trend line resistance. On the chart, supports are seen at 577 & 571 which are 61.8% & 76.4%
respectively Fibonacci projection of the above range. The crucial support seen at 561.50 (100%) on breach
and sustained below is likely to test 552 level which is 123.6% Fibonacci projection of the above mentioned
range. The principle of moving average price is trading below the short & medium- term EMA’s of (8, 21&34)
days, which indicates resistance seen at higher levels. Directional Movement Indicator, ADX (14) has
suggested downside momentums further. Another momentum indicator RSI (14) is trading at 0.51which is
suggesting limited pullback may be possible further. From the above analysis we expect potato prices to
remain sideways to downside biased during the coming weeks.
Short Term 1-3 months
Trading range: 590 – 570
Medium Term 3-5 Months
Trading range: 600- 555

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