The cardamom futures contract traded on the Multi Commodity Exchange (MCX) has been on an uptrend since mid-February this year. Prices have jumped more than 54.7 per cent to touch ₹925 a kg in July from ₹598 in February.

This increase in prices is mainly attributed to the long dry spell in cardamom growing areas of South India, which is expected to impact cardamom production in the 2016-17 season.

Impact on production

The extended dry spell with high temperatures that prevailed from December 2015 to the first fortnight of May 2016 affected the flower setting, thereby delaying the harvest.

According to trade sources, dry weather has affected about 10-15 per cent of cardamom plants and an estimated a loss of 20-25 per cent in production in Kerala’s Idukki district, which produces 80 per cent of the small cardamom in the country.

Thus, cardamom output is pegged at about 17,000-18,000 tonnes next year compared to 25,000 tonnes last year.

Currently, cardamom arrivals have been slowing down because of non-availability of good quality grade capsules. The arrivals during the first three weeks of July decreased by 42 per cent to 888 tonnes compared to 1,586 tonnes in June.

The harvest is done in about six pickings from July to March and the peak arrival season starts in August.

The arrivals will increase till December. However, this year the new crop arrivals will be late due to the extended dry weather during the first 3-4 months of the year.

Exports may drop

Export shipments in 2016-17 are expected to drop due to expectations of less availability on higher domestic consumption and higher prices. Domestic consumption is expected to be about 12,000-15,000 tonnes.

The country exports roughly 15-20 per cent of its total cardamom production, thus, next year exports may be around 3,500-4,000 tonnes.

Last year, cardamom exports jumped 35.8 per cent over the previous year to 5,938 tonnes, according to Department of Commerce data.

The growth was driven by higher production and lower prices.

Cardamom prices have been on the rise on expectations of a late harvest and lower production.

Normally, the fresh crop starts arriving in the market in July but this time the new arrivals are expected to pick up only after August.

Delayed arrivals and lower stocks coupled with good export demand from West Asia should keep cardamom prices firm. It is expected that farmers may hold their high-quality cardamom to be harvested in August and may release at higher prices.

We expect the MCX September contract (CMP: ₹895) to touch around ₹950 a kg or even higher as stockists and exporters may quote higher prices on reports of lower production.

The price may ease after October as cardamom from Guatemala enters the domestic market.

The writer is Associate Director – Commodities & Currencies Business, Equity Research & Advisory, Angel Broking. Views are personal.

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