Monthly Report On 2nd July, 2018 SPICES July 2018
TURMERIC (August) 7500 Forward curve of Turmeric futures 50% Historic returns of Turmeric futures during month of July 7450 40% 40.21% 7446 30% 7400 20% 18.09% 7350 7362 7368 10% 0% 0.63% 7300 7290-10% -5.95% -12.79% -2.37% -1.66% 7250 July August September October -20% 2011 2012 2013 2014 2015 2016 2017 Source: NCDEX Closing as on 29th June, 2018 Source: Reuters & SMC Research S2 S1 Pivot R1 R2 6737 7013 7257 7533 7777 Fundamentals An upside momentum will continue to persist in turmeric futures (August) and is likely to take support near 7000 levels, while the upside can get extended towards 7500-8000 levels. The sentiments are turning optimistic because of a slow pace of sowing in key growing regions due to low rainfall. Rainfall is not promising right now, so farmers who don't have artificial irrigation facilities are waiting for monsoon to pick pace. At the Erode Turmeric Merchants Association Sales yard the finger turmeric was sold at 6,321-8,559 a quintal; and root variety at 5,556-8,049. At the Regulated Marketing Committee the finger turmeric was sold at 7,094-8,294 and root variety at 6,674-7,560. Turmeric grown in Maharashtra's Sangli district has received the geographical indication tag by Indian Patents office. Turmeric from the region will now be sold with the label "Sangli Halad" brand all over the country, and will be recognised as Sangli brand in international markets. Day s ahead, turmeric prices may gain due to demand from Iran and Bangladesh and the slow pace of sowing in largest producer Telangana. Rainfall is not promising right now, so farmers who don't have artificial irrigation facilities are waiting for monsoon to pick pace. This year, the IMD has forecast the possibility of monsoon less than normal in key producing areas, which can reduce the production estimates. But the share of sowing in Maharashtra and Tamil Nadu can be increased as farmers benefited from the spice this year, due to which they are being seen to give priority to sowing of turmeric. The arrival in the mandis is continuously decreasing because the farmers are engaged in sowing work. Traders do not have much stock due to which the business is limited in the market. About 80 to 85 percent of turmeric in Maharashtra has been arrived and farmers prefer to sell the remaining produce on high prices. In southern India too, the arrival is almost complete. This year, sowing of turmeric is expected to increase in Marathwada, Vidarbha and many parts of Khandesh (Jalgaon, Dhule/Dhulia, Malegaon, Aurangabad, Akola, Buldhana) due to which, the crop in Maharashtra is expected to be about one and a half times as compared to last year. But now there is a delay in the sowing owing to the slow progress of monsoon, due to which it can be difficult to guess at this time. Till date, 30 to 32 lakh bags of turmeric stock are being seen on the spot markets. Besides, new turmeric crops will take at least 9 to 10 months to come into the market. For the said nine months, there will not be enough stock in the market, which is likely to support the chances of uptrend in the coming 3 to 6 months. If there is a slight delay in monsoon then the prices of turmeric can increase to some extent. 2
JEERA (August) Forward curve of Jeera futures Historic returns of Jeera futures during month of July 19100 19000 18900 19010 14% 12% 10% 9.39% 13.03% 9.20% 18800 18840 8% 18700 18600 18670 6% 4% 2% 2.27% 18500 18400 18300 18500 0% -2% -4% -6% -1.59% -0.71% -5.15% 18200 July August September October -8% 2011 2012 2013 2014 2015 2016 2017 Source: NCDEX Closing as on 29th June, 2018 Source: Reuters & SMC Research S2 S1 Pivot R1 R2 14827 16748 17757 19678 20687 Fundamentals The overall trend of Jeera futures (August) is bullish, however, entering into fresh trade at such higher levels may get risky. If we look into the weekly charts, the counter is in over bought zone & profit booking may emerge anytime. Hence, we recommend buying at lower levels around 17500-18000, for a target of 20000 in long term. The reason being, there is a strong support near 17000 levels &if we take a closer into the monthly charts, there is still more room for the prices to surge amid strong fundamentals of robust export demand. Contracts of jeera rose for the third consecutive month, and hit a five-month high of 18,615 rupees per 100 kg on the national bourse because of positive exports data. In FY 18, exports of jeera were at 143,670 tn, up 21% on year. India is likely to have exported a little over 70,000 tn of jeera in Apr-Jun, up nearly 63% on year. Exports are on a rise because there are no competitors left in the global market as heavy rainfall in Syria and Turkey has led to crop damage there. And considering the situation there, the importers are not willing to import from Syria, which is increasing the demand for the spice in the Indian market. The advantage of weakness in the Rupee is being taken by China, Bangladesh, Taiwan and Dubai because the import becomes cheaper when the Indian Rupee weakens. Therefore, as long as the Indian Rupee will remain weak, demand may remain in export. It is worth mentioning that in Bangladesh, the banks were not doing outward remittance till w days ago e to the lack of foreign currency. But at this time there is an improvement in the condition, and banks are easing the rules, so that the importers are buying Indian jeera. In May, the export of jeera (from Mundra and Pipavav Port) was approximately (21,962 tonnes from Mundra and 3,839 tonnes from Pipavav) at 25,801 tonnes, clearly indicating that the demand in export is on the increase. Also, there is a concern in the market due to the delay in the monsoon, which is causing a sporadic spat in the spice market. Meanwhile, jeera has strained all the spices, leaving behind it. If the Rupee remains weak in the same way, strong uptrend can be seen due to export demand. Last but not the least, most of the available jeera stock is lying with farmers and they are holding back as they are waiting for monsoon to arrive in Gujarat. If rains are weak, they will continue holding back stocks as prospects of sowing will be poor and prices will rise. 3
CARDAMOM (August) 1020.00 1000.00 980.00 960.00 940.00 920.00 900.00 880.00 Forward curve of Cardamom futures 994.70 978.70 920.00 920.00 920.00 Historic returns of Cardamom futures during month of July 15% 10% 5% 0% -5% -10% -15% -20% -25% -8.74% -4.72% -7.45% 10.40% -1.13% 9.75% -13.65% 860.00 July August September October November -30% 2011 2012 2013 2014 2015 2016 2017 Source: MCX Closing as on 29th June, 2018 Source: Reuters & SMC Research S2 S1 Pivot R1 R2 834 906 948 1020 1062 Fundamentals Since past one month, cardamom prices are skyrocketing on the back of reports of crop damage. This phenomenon is likely to continue & the outlook of cardamom is bullish as the prices have the potential to test 1050-1100 levels, taking support near 955 levels. For the past one year, cardamom has been fetching Rs.800-1,000 per kg despite good production thanks to robust export demand. In FY 18, shipments of small cardamom hit an all-time record high of 5,680 tn, up 48% from previous year. Further, damage caused to cardamom plantation due to heavy rainfall and strong winds at Idukki district in Kerala is lending support to prices. Plantations spread over 1,229.60 ha in Idukki have been damaged due to heavy rains, according to the state's department of agriculture development and farmers' welfare. Earlier, traders had pegged cardamom production at 30,000 tn for 2018-19 (Jul-Jun), but now a fall of 30-35% from this level is seen. Almost 35% of the crop may be damaged, but there are chances that 10% may regain but that will only be clear when picking starts in August. Shoots of cardamom have been damage. It will have to grow again and then capsules and flowering will take place. Rotting will deteriorate quality of the crop, which will eventually end up in lesser output this year as inferior quality cardamom will be discarded. In the outlook for next two weeks, the Indian Metrological Department has predicted that Conditions are favourable for further advance of Southwest Monsoon into remaining parts of north Arabian sea, Gujarat, Rajasthan and thus the entirecountry during next 2-3 days. 4
SPREADS Daily spread chart of Turmeric futures (July & August) Source: Reuters Daily spread chart of Jeera futures (July & August) Source: Reuters Daily spread chart of Cardamom futures (July & August) Source: Reuters 5
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