Spices Set to Sizzle amid Improved Demand Outlook

by Neha Anand 

The spice complex is regaining its colour fragrance, as turmeric, coriander and jeera futures on NCDEX rebounded this week, after 3-4 weeks of downward trend in their prices. Spices witnessed sideways to lower movement since the later part of May 2021.

Nearly all the spices shed 7-13% in the span of one month until last week. During the period, most of the mandi traders were seen negotiating the deals as per the short-term requirements only. Spot Jeera at Unjha and Jodhpur has dropped by Rs.400-500 per quintal over a month’s period. At the same time, Turmeric in Nizamabad mandi is down Rs.300-400 on a quintal. Likewise, coriander in markets of Jaipur and Kota shed Rs.100-200 per quintal.  

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On NCDEX, July futures of jeera slumped by Rs more than Rs 1,000 between 17th May and 18th June, as the commodity dropped from levels of Rs 14,330 to Rs 13,280 per Quintal.

Coriander and turmeric markets were also affected from ongoing lockdown restrictions. Due to limited trading activity and weak demand, buyers preferred trading for covering their short term needs only.  Prices are fairly valued now while the broader view remains optimistic from a business perspective. Therefore it is quite likely that the tendency to stock the commodities from prevailing offers shall improve gradually.  

While the most-active contract of coriander in NCDEX lost 10% between 25t May and 17th June, turmeric futures dropped 13.2% in a span of 4 weeks ending 18th June.

But with the unlock process on the roll now, the mandis are re-opening. Experts are therefore expecting trading activities to improve slowly. Indian sellers are not interested to deal at lower offers in anticipation of getting better prices in near future. Now the traders do not expect much fall in Jeera prices. 

Jeera:
Traders' estimates indicate that production of Jeera/Cumin may fall by 10 to 15% compared to last year. Production was around 92 lakh bags (55 kg per bag) in 2019-2020. This season, the output may be between 85 and 90 lakh bags.  As per the government data, the planted area in Gujarat state has dropped to 4.69 lakh hectares from last season’s 4.88 lakh hectares.

Production in Turkey was around 15,000 tonne last year, and the country may produce less this year as estimated by traders and industry persons. Similar situation is seen in Syria, where production is estimated to be lower because of political instability. Turkey and Syria are closest rivals of India in terms of exporting cumin. This implies that India will have the advantage of supplying most of the world’s requirements of cumin this year.

Turmeric:
In case of turmeric, domestic consumption has improved significantly after the Covid outbreak, mainly because of the efforts of the Aayush Ministry and increasing awareness of turmeric being a strong immunity builder. On the whole, an increase in export sales and rise in the domestic use of turmeric as an immunity builder has resulted in smaller carryover stock from last year — along with low crop production because of adverse weather in the producing belts. 

Heavy rainfall in Maharashtra and Telangana during the end of 2020 had adversely affected the optimal development of crop bulbs in final stages. According to data from Agricultural and Processed Food Products Export Development Authority, Telangana and Maharashtra contribute more than 50 per cent of India’s 9 Lakh tonnes of turmeric production. Traders expect a 10-15% drop in output in the major producing states of Telangana, Andhra Pradesh and Maharashtra due to heavy rainfall during the crop development period. The carry-forward inventory for the next season is estimated at 15 lakh bags (1 bag=65 kgs); thinnest stock in the last three years.  

Coriander:
There are reports Gujarat’s production estimate falling short of 55-60 lakh bags, pegged earlier. Most traders expect a lower figure now. Market talks indicate that nearly 80% of Gujarat's arrival will be over in a month’s time. Remainder is in the hands of big farmers and stockists who are unlikely to liquidate their stocks, in anticipation of improved demand outlook. Rajasthan and MP have reportedly received 75% of the respective production. Inventories are running low due to robust consumption since the beginning of this year.  

Having said so, technical chart experts forecast a near-term weakness which could drag coriander July futures to Rs 6,275 per Quintal in near future, before a bullish trend revives.

Price Outlook
For the next few weeks, hand-to-mouth business is expected in jeera, turmeric and coriander. With many states lifting lockdown restrictions, commercial demand from Hotels, restaurants and catering (HoReCa) is expected to roll in, pushing demand for spices. Even lull export business will weigh in the price pattern to initiate deals. Most of the analysts advise going long/purchasing on dips from a month's perspective.

Sunand Subramanium, Senior Research Analyst at Choice Broking sees a bullish trend in jeera, coriander and turmeric by expiry of the lead-month contract on NCDEX. " I am extremely bullish on jeera and coriander contracts and see them reaching the targets of Rs 14,000 per Quintal and Rs 7,200 per Quintal respectively in next three weeks", says Sunand. He adds, " While turmeric contracts would edge higher too and touch levels close to Rs 8,200/ Quintal, I would like to advise caution and would refrain from being excessively bullish, as increased sowing in key South Indian belts of Andhra Pradesh, Telangana and parts of Karnataka may cap price gains amid decent rain showers".

On a similar note, Anuj Gupta of IIFL Securities advises to go long in the lead-month contract of Jeera, turmeric and coriander on NCDEX for targets of Rs 14,000/Quintal, Rs 8,000/ Quintal and Rs 7,100 per Quintal respectively. Anuj expects to see the spices hit their respective targets by July expiry. He advises buy-on-dips in all the above-mentioned spice contracts. Traders and farmers are advised to continue holding their supplies and sell their produce after a few months. Also, now is a good time to go for fresh purchases/stocking of these three spices, in order to generate decent returns in the coming months.