Jeera’s outlook is positive, in the short term as prices are trading at very high levels. We are expecting some profit booking to be seen in the prices. Currently prices are trading around Rs 42,000 levels on NCDEX. The outlook for Dhaniya and Turmeric is also positive in the long term. Export demand on the lower levels may attract the buyers from overseas. Fear of El-Nino and likelihood of below normal rain will push the Dhaniya and Turmeric prices up, says Anuj Gupta, Vice President (VP), Commodity and Currency Research at IIFL Securities.
What has led to a significant spike in the prices of spices and what is the outlook?
Prices of spices, particularly those of Jeera, have rallied sharply on the back of strong domestic demand and export demand coupled with the tight supply situation in the country. From 2021, till date, Jeera has increased by 147.89%; Dhaniya has gone up by 21.54% while Turmeric prices have increased by 31.29%.
Physical trades in the spices are yielding good margins and in the last three years, there has been wonderful returns in spices.
These spices are also traded on electronic exchange NCDEX, the largest agricultural commodity exchange in the country.
This price appreciation is basically due to the mismatch in demand and supply as tight supplies across the globe have engineered elevation in price levels.
How much of the price appreciation in Jeera could be attributed to the crop damage in Gujarat and Rajasthan?
At least 70% of the Jeera or cumin crop in Rajasthan and around 30% in Gujarat is yet to be harvested. Because of the rain in both states, the total yield will be reduced. As per the FISS (Federation of Indian Spices Stakeholders – India’s biggest spice traders association) cumin demand is predicted to exceed 85 lakh bags this year, with a likely supply of 65 lakh bags. One bag holds 55kg.
The market is expecting a lower yield and quality of jeera this season, which has boosted the demand from domestic and export buyers. In comparison to the planned arrival of 70 lakh bags, the stock will be reduced to 60-65 lakh bags, with a carry-forward stock of 5 lakh bags from last year. Jeera is the king of the spices as it has increased by 147.89% since the year 2021. The year-to-date increase is over 27% which is also highest in the spice segment. Tight supplies and higher demand have kept prices at elevated levels.
What is the short, medium and long term price outlook for Jeera?
Jeera outlook is positive, in the short term as prices are trading on very high levels so we are expecting some profit booking may be seen in the prices, currently prices are trading around Rs 42,000 levels on NCDEX.
Over the long term, fears of El-Nino may loom. A below average rain could impact production of Jeera and other spices. So, in the long term, we are expecting Jeera to test Rs 45,000 to Rs 50,000 levels (1 year view).
What is the outlook for Turmeric and Dhaniya going ahead?
The outlook for Dhaniya and Turmeric is also positive in the long term. Export demand on the lower levels may attract the buyers from overseas. Fear of El-Nino and likelihood of below normal rain will push the Dhaniya and Turmeric prices up. In the long term Dhaniya may test Rs 7,000 to 7,500 levels and Turmeric may test Rs 7,500 to Rs 8,000 levels.
What will be the impact on demand for spices considering that summers have arrived?
Demand for spices increases generally in summers. We expect a similar trend this time around, too. However the supplies are short but for the blending in Garam Masala (Warming Spices) the demand of Dhaniya may increase. For health reasons, turmeric demand may also increase in summer and also in the event of Covid-19 picking-up.
What should be the strategy for traders willing to take positions in these commodities?
For the Traders we are recommending buy on dips in the spice segment. Traders can buy jeera around Rs 36,000 to Rs 37,000 with the stop loss of Rs 31,000 levels for the target of Rs 45,000 levels to Rs 50,000 levels.
As for turmeric, traders can look to buy it around Rs 6,000 to Rs 6,200 with the stop loss of Rs 5,400 for the target of Rs 7,500 to Rs 8,000 levels. For Dhaniya they can buy around Rs 5,800 to Rs 6,000 with the stop loss of Rs 5,200 levels for the target of Rs 7,000 to Rs 7,500 levels.
Our view is optimistic for the spices. They can start trading and do hedging in spices by using NCDEX Platform.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)