A month-long losing streak in cardamom prices have almost paused for the time being. But prices are still trading well below its recent peak of Rs 1,500 a kg. Since the start of August, prices continued to hit lows and dropped to Rs 707.40/ kg last week. Prices lost almost 50 per cent in the futures platform during the period.
Earlier, unexpected rain in the initial stages of South West monsoon raised worries over crop output and lifted prices from its life time low of Rs 545/ kg to one and half year high of Rs 1,508/ kg.
Higher arrivals in major spot markets, carryover stock, sluggish domestic and overseas demand and conducive weather conditions in major growing areas are the key factors influencing the ongoing weak momentum.
Major spot markets are currently reporting high arrivals due to sufficient carryover stocks. Last year, growers had a bumper crop but subdued demand prompted them to hold back their produce for next season. In 2011-12 harvest, India had a record output of 18,000 tonnes according to official records while traders say it is around 22,000-25,000 tonnes.
According to Spices Board records, Indian export accounted for more than 1,500 tonnes in the year 2011-12, well above the average annual exports. In these situation too, growers are maintaining high carryover socks. About 60-70 per cent of crop coming to the market in this season consist of produce from the previous crop.
Adding to this situation, the MCX accredited warehouses are reporting high stocks compared with same period last year. Moreover, the high demand oriented 7-mm cardamom production is comparatively low in India against the 6-mm capsules which are in low demand.
Prevalent climatic conditions in major crop producing areas have eased concerns of lower output. Previously, growers were worried about the delayed monsoon and high temperature in the major production belt and estimated a crop loss of 40-50 per cent. Dull festive based demand and subdued offtake from pan masala/ gutka manufactures are the other reason for such liquidation in prices.
Since, no major festivals are in line during these periods, only lacklustre buying is reported from confectionary and baking sector.
As a vital food ingredient, cardamom typically accounts for higher demand during the festive season. However, demand from pan masala/ gutka manufacturing sectors is notably lower after the ban on such products. Gutka manufacturer’s purchase of inferior quality cardamom was estimated around 2,000 tonnes in a year.
Overseas buyers prefer cardamom from Guatemala due to its superior quality and good price advantage. Guatemala is the world’s largest producer and exporter of cardamom.
On an average annual basis, Guatemala exports around 25,000 tonnes of cardamom. Reports say that Guatemala will maintain high production in the current season too.
Additionally, as per recent reports, India is facing stiff competition from African new comers like Nigeria and Ethiopia, which have started planting cardamom in a big way. However, export demand remains sluggish as overseas stockiest are having high carryover stocks. Meanwhile, in this worst case scenario, Indian exports to Middle East countries were reported higher just before the period of Ramadan. Even then market participants expect a good export demand from Europe and the US before Christmas and New Year. Proportionate rise in domestic buying is also anticipated before Diwali fever kick starts.
Amid these feeble fundamentals, enduring weak bias could probably suffocate prices inside Rs 1100-850 per Kg regions on MCX futures platform for short term period. But, restorative rallies are highly anticipated by growers due to a possible change in weather pattern which they presume has affected 50 per cent of the output.
(The author is Whole Time Director of Geojit Comtrade Ltd. The views are personal)