Cardamom to retain flavour

Export demand and below-normal monsoon can further hold up prices



Cardamom prices have rallied remarkably since the beginning of the year.They are up some 45 per cent so far. Pick-up in export demand, coupled with increased buying by domestic market retailers, stoked prices.

Data from the Spices Board India show that cardamom exports have risen 13 per cent to 2,490 tonnes during April-December 2013 compared with the same period a year ago.

Cardamom prices in the domestic market may rule higher at least for the next few more months. The India Meteorological Department, which has forecast a below-normal monsoon this year, has said the monsoon could set in over Kerala around June 5 against the normal June 1.

So, any correction in cardamom prices in the short-term could be short lived. The monsoon-led supply risk will hold prices from falling.

The only threat for prices could be a likely increase in imports from Guatemala, the world’s largest producer of cardamom. As domestic market prices have gone up sharply, there is a possibility of cheaper imports rising. Though India ranks second in production, on the quality front, Indian cardamom is considered the best.

Outlook

Long-term view: The long-term trend for the MCX-cardamom futures price (₹982.1 per kg) is up. The reversal from the December 2013 low of ₹571 has happened from an important long-term trend line support level. This reversal is now on the verge to break the strong downtrend that is in place since 2010. A decisive close above the psychological level of ₹1,000 this month would confirm the trend reversal.

Key long-term support for the contract is at ₹600. The outlook will remain bullish as long as the contract trades above this level. The current rally can extend further in the coming months. A rise to ₹1,300 looks likely now. However, this level of ₹1,300 is a crucial resistance level for the commodity.

Looking at historic price charts, there is a tendency for cardamom prices to peak in July and then drop. So if this crucial resistance at ₹1,300 is tested by July then a sharp correction could be on the cards within the overall uptrend. Such a correction can take the price lower to ₹800 or 700 levels.

Medium-term view

The medium-term trend is up. However, there is an important medium-term resistance coming up for the contract near ₹1,145, the 61.8 per cent Fibonacci retracement level.

Failure to breach this resistance immediately could see a corrective fall in the coming weeks that could take the price lower. Key medium-term supports are placed at ₹850, ₹800 and ₹775 which can limit the expected corrective fall.

Fresh buying interest can emerge in the above mentioned support levels. While the contract trades above ₹775 the medium-term outlook will remain bullish for a target of ₹1,200-1,250.

Short-term view

The MCX-cardamom futures contract has increased sharply in a short span of time.

Failure to breach ₹1,100 and a sharp fall in the last two trading days last week has increased the probability for a short-term correction. Key short-term resistance levels are at ₹1,000, ₹1,050 and then ₹1,100.

While the contract trades below these resistance levels, the current fall can take the contract lower to ₹900 in the short term. The contract will now require a decisive close above ₹1,100 in order to bring back the bulls in to the market. Such a break can take the contract higher to ₹1,150 and ₹1,200 thereafter.

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