Turmeric may drop despite dip in output

Driven by healthy fundamentals, turmeric prices have been trading in bullish trajectory since mid-2012. They have gone up nearly 90 per cent. The period saw the golden spice making a stupendous recovery from its record low of Rs 3,474 a quintal to Rs 6,900 a quintal.

The acreage under turmeric in major producing States of Andhra Pradesh and Maharashtra are projected to be lower. Prices hit a record high of Rs 15,636 a quintal in June 2010 on the NCDEX due to apprehensions of crop damage. This had resulted in an increase in cultivation that subsequently led to a surge in production.

Rain plays havoc

India produced 65 lakh bags in the year 2011 and 90 lakh bags in 2012 against an average production of 40-42 lakh bags. This forced prices to head south, plunging to Rs 3,350 a quintal by mid-2012. This scaling down of the prices pushed farmers’ to take up cultivation of other crops leading to a decline in acreage by almost 30 per cent.

Heavy rain in Andhra Pradesh in February has damaged the crop and raised concerns over quality. Around 9,240 tonnes of turmeric in Nizamabad yard were reported damaged. Also, the crop size in Tamil Nadu is expected to be lower and arrivals are quite thin compared with the last year. Hence, India’s total production of turmeric in 2013 could decline by 50-60 per cent against last year’s record high of 90 lakh bags.

Indian turmeric is considered as the best quality crop in the world due to its high curcumin contents. In India, turmeric is grown as a kharif crop with sowing period beginning from May and extending up to August, whereas arrivals start from February. The crop is ready for harvest in approximately 7-9 months.

Andhra Pradesh, Tamil Nadu, Odisha, West Bengal, and Karnataka are the top producing States. Andhra Pradesh contributes roughly around 47 per cent of the total production. Turmeric is mainly used to flavour and colour foodstuffs and an ingredient in cosmetics and medicines.

Major players

India is the world’s largest turmeric exporter accounting for 60 per cent of the world turmeric exports. The other major producing countries are China, Bangladesh, and Myanmar. UAE is the major importer from India buying over 18 per cent of the total India’s exports followed by the US with 8 per cent.

Japan, Sri Lanka, UK, Malaysia, South Africa and Netherlands are the other countries importing from India. According to the Spices Board, India exported around 7,300 tonnes of turmeric in April 2012 against 7,230 tonnes in April 2011.

The dearth of sales by cultivators and strong offtake by investors due to lower production forecast may propel gains in turmeric prices. However, despite a lower crop projection estimates, the commodity is expected to drop in the immediate run on the back of fresh crop arrivals, whereas expectations of pick up in demand ahead of festive season and other bullish fundamentals are likely to support prices later.

The immediate upside targets are Rs 7,250/ 7,950 a quintal. In the long run, followed by Rs 10,350/14,000 levels may be expected on the NCDEX futures platform.

(The author is Whole Time Director, Geojit Comtrade Ltd. The views are personal)

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