The Hindu Business Line : Suspend cardamom futures: Spices Board

THE Spices Board has requested the National Multi Commodity Exchange (NMCE) to suspend futures trading in cardamom, according to the Cardamom Growers' Association, Vandanmedu, Idukki district. The association represents about 1,800 cardamom growers in Kerala and Tamil Nadu. The association feels that once futures trading in cardamom is suspended, the price situation could be restored to normalcy.

Ever since futures trading started in cardamom, the price has declined drastically both in the open market and auctions causing severe loss and hardships to the cardamom community. There is considerable difference between the price quoted for cardamom in futures trading through the commodity exchanges and the prices realised through open market auctions, the principal outlets of cardamom marketing, Mr P.N. Krishnankutty Nair, Vice-President of the Association, told Business Line.

During 2003-04, when the spot price of cardamom was in the range of Rs 400 to Rs 450 a kg, the futures market quoted Rs 600-650 a kg leading to hoarding and holding of excess stock. This has resulted in steep fall in prices during 2004-2005.

The auction prices of cardamom fell to Rs 300 per kg but in the futures, the prices fell more sharply to Rs 220-250 a kg. The low quotes in the futures have a tendency to pull down prices in the spot market.

The average auction price of cardamom at the auctions during the first week of November 2004 was Rs 310 a kg. At the same time, the online futures quoted below Rs 250 a kg (see table).

"It is quiet evident that the futures trading has failed to reflect even distant shade of the real price. Only name sake trading is going on in the online market. Low quality cardamom is traded online compared to the average quality cardamom arriving at the auctions," said the growers.

Cardamom is not a commodity suitable for futures trading since it cannot be held in stock for long periods without losing its colour and other qualities said Mr Nair.

The grades of cardamom vary significantly even under the grades of AGEB (Alappuzha Green Extra Bold) and ACB (Alappuzha Green Bold). There are different grades depending upon colour, odour, shining, weight, size etc. A consignment technically branded as AGEB traded in the futures market is of very poor quality fetching very low prices in the market. Online traders are making use of this loophole.

Other similar produces that are traded online are getting higher prices than the cost of production.

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Suspend cardamom futures: Spices Board