Coriander (dhaniya) prices have surged some 19 per cent since May to record highs on the National Commodity and Derivatives Exchange (NCDEX). Strong domestic demand in the spot market, coupled with weaker supply in recent times, has triggered the rally. Also, the threat of a lower supply this year following the heavy and unseasonal rainfall in Rajasthan, the largest producer in India, has supported prices. The price of the NCDEX-dhaniya futures contract has surged 127 per cent from its August 2013 low of ₹5,000 per quintal to ₹11,347 now.

India is the largest producer of coriander in the world, accounting for about 80 per cent of the global production. Export demand for this spice crop has increased significantly in the last couple of years. Data from the Indian Department of Commerce suggest that coriander exports have picked up since 2011-12 after falling for three consecutive years between 2008-09 and 2010-11. Coriander exports increased about 30 per cent in 2012-13. In 2013-14 (April to December), exports are up 48 per cent compared with the same period a year ago, according to the Spices Board India.

Coriander exports in the past have dropped at times when the rupee had strengthened against the dollar. Now, given the unrest in Iraq and surging crude price, the rupee is only expected to remain weak, at least for the short term. Coriander production in 2012-13 is likely to have increased by 3 per cent to 5.27 lakh tonnes, says the agriculture department.

This year, with a below normal monsoon and the possibility of an El Nino, production may not be significantly higher; in fact, there is risk of a drop in production. So, coriander prices may rule higher in the short term.

Outlook

Long-term view: The long-term trend in the NCDEX-dhaniya contract is up. Technically, the price of this contract has entered the uncharted territory. So the upside remains unlimited at the moment. The contract can rise to as high as ₹13,500 per quintal in the long-term. Any corrective fall could find support near ₹8,700 and ₹7,500 which are the key long-term supports for the contract.

Medium-term view: The medium-term outlook is also bullish. The 21-week moving average at ₹9,531 is a key medium-term support for the contract.

While above this support level, a rise to ₹12,500 looks likely in this time frame.

Only a strong break and close below the 21-week moving average will turn the outlook bearish. The ensuing target on such a break will be ₹8,700 and ₹8,500.

Short-term view: The short-term view is bullish for the NCDEX-dhania contract. The contract has formed a wedge pattern between April and May and has witnessed a bullish break out of this pattern in June. It has also risen above the psychological ₹11,000 level.

However, a crucial short-term resistance is coming up for the contract in the ₹11,700-11,800 zone. A reversal from this resistance can take the contract lower to ₹10,500 and ₹10,000 in the short-term. On the other hand, if the contract manages to breach the resistance at ₹11,800 immediately, it can extend the current rally to ₹12,000 and ₹12,300.

But given the fact that the contract has risen so sharp and so fast in a short span of time, the probability is high for the contract to take a pause and see an interim reversal from ₹12,700-800 resistance zone.

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