Turmeric to remain bullish on concerns of lower output

Turmeric prices have been on an upswing for the past four months. This bullish trend is expected to remain intact on concerns over production due to erratic rainfall during monsoon. Moreover, reports of lower sowing and water stress conditions in major turmeric growing state may affect yields.

In the past one month, the turmeric futures contract traded on National Commodity and Derivative Exchange (NCDEX) surged more than 15.3 per cent to ₹8,984 per quintal from ₹7,788 levels. This increase in price is supported by upcountry demand due to arrival of good quality turmeric.

The surge in price started in July after below normal monsoon rains recorded in southern peninsula region as also parts of Maharashtra.

However, prices declined by about 6 per cent to ₹7,850 levels during September after touching ₹8,500 levels due to late surge in monsoon rains in southern peninsula. Since then the prices have increased by about 10.8 per cent

This year monsoon rain that covered entire country in June provided an ideal moisture condition. However, the intensity of rainfall decreased during July and August resulting in moisture stress in Telangana, Karnataka and Maharashtra. Thus, turmeric acreage in these states declined.

As per latest sowing data from various state departments, turmeric sowing in Andhra Pradesh was on 15,753 hectares, an increase over last year’s acreage but well below the normal sowing area of over 19,000 hectares. In Telangana, turmeric has been planted in 40,823 hectares, about 17 per cent lower than the normal sowing area. Similarly in Maharashtra and Karnataka the acreage dropped by about 25-30 per cent to 7,000 hectares and 12,000 hectares respectively.

However, due to better irrigation facilities and sufficient rains, acreage in Tamil Nadu increased by 10-12 per cent compared to last year to over 50,000 hectares.

Turmeric production in India has declined over the last few years as lower returns forced farmers to shift to other remunerative crops like cotton, sunflower and vegetables. As per trade sources, the production of turmeric in 2015/16 may decline by about 5-10 per cent to 6.8 lakh tonnes (lt) compared to 7.3 lt produced last year. As per Agmarknet data, turmeric arrivals were recorded at 1.26 lt compared to 1.86 lt arrived last year during first ten months of the year. This year the arrivals are down by more than 32 per cent.

Turmeric exports during the first five months of 2015-16 are pegged at 38,774 tonnes, as per data published by the Department of Commerce, same as last year’s exports. Last year, the country exported 90,000 tonnes of turmeric. For this year, the Spices Board has set a target of only 80,000 tonnes due to high domestic consumption and expectation of lower output.

The bullish trend in turmeric may continue on expectation of tight supply-demand situation as the carryover stocks are diminishing over the years due to lower production trends. Since the starting of sowing season, the uptrend in the turmeric price is intact and we expect prices to touch ₹10,000 per quintal on limited supplies and improved domestic demand as the new season crop will arrive only next year.

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