Higher output estimates take sheen off turmeric

Prices of turmeric on the National Commodities and Derivative Exchange (NCDEX) have been on a downtrend since the start of the year due to availability of sufficient stocks in the domestic market.

In the first quarter, prices started to decline following peak arrivals in February. The negative momentum continued in the next two quarters as well as stockists and upcountry traders were retaining stocks due to the rise in production and higher carry-over stocks.

Moreover, steady imports throughout the first six months of the year kept stocks higher in the domestic market. Shipments have also grown during the same period due to arrival of good quality turmeric and declining prices. The forecast of an above-normal monsoon also weighed on the prices.

In 2016 (YTD), turmeric prices on the NCDEX slipped from ₹10,166 a quintal in January to ₹6,614 in September, a decline of more than 32 per cent.

Moreover, prices declined by 21.6 per cent in the last four weeks on reports of higher acreage and satisfactory progress of turmeric crops.

But, lower production in two consecutive seasons and good export demand are keeping prices on the higher side — at a 4-year high.

The acreage of turmeric during the current year is higher compared to the last two years due to normal monsoon rains in the main turmeric growing States of Tamil Nadu, Telangana and Maharashtra, which occupy about 60 per cent of the total turmeric area in the country. As on September 7, turmeric acreage in Telangana was up 12 per cent at 46,000 hectares.

Similarly, major turmeric growing areas of Tamil Nadu and Maharashtra received good rains. Trade sources expect turmeric production to cross 11 lakh tonnes (lt) in 2016-17 from 8 lt during the last two years.

During the current year, higher arrivals in domestic markets and steady import of turmeric by industrial buyers has hurt turmeric prices.

Arrivals of turmeric have been declining since the last three months although they are 70 per cent higher than last year’s arrivals.

As per Agmarknet data, the quantity of turmeric arrivals in the country was at 1,85,198 tonnes till August — up 60 per cent over the 1,15,579 tonnes recorded last year.

The country imports turmeric mainly from Myanmar, Ethiopia and Vietnam. In the first quarter of 2016-17, it imported about 5,069 tonnes of turmeric — 26 per cent more than last year. Turmeric imports increased by more than 110 per cent in two years from 2013-14 to 2015-16.

Turmeric prices have been under pressure in 2016 and are expected to remain bearish due to steady supplies and anticipation of higher output next year.

We expect turmeric prices to touch ₹6,200 a quintal (CMP: ₹6,750), if the good weather holds for the rest of the season.

However, if the weather proves unhelpful during the next two months, prices may shoot up to ₹8,000 levels.

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

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