Commodity Analysis

Flavourful facts about cardamom

Gurumurthy K | Updated on January 16, 2018 Published on October 02, 2016


India is the second-largest producer of the ‘queen of spices’ next to Gautemala

Cardamom, the ‘queen of spices’ is the costliest among its peers. India is the second-largest producer of cardamom next to Gautemala. However, Indian cardamom is considered the best in terms of quality.

Cardamom grown in Gautemala is available at a cheaper rate. So, higher imports from Gautemala impact domestic prices. Apart from imports, the entry of Gautemalan cardamom through illegal routes also increases whenever domestic prices surge. However, in recent times, a sharp drop in production in Gautemala has aided an increase in domestic cardamom prices.

Futures market

The cardamom futures contract is traded only on the Multi Commodity Exchange (MCX) and is not available for trading on the National Commodity and Derivatives Exchange (NCDEX) where most agri-commodities are traded. On MCX, cardamom futures are traded between 10 am and 5 pm, Monday to Friday. One lot is 100 kg (one quintal) and the price quoted is for one kg. The 15th of every month is the contract expiry date. An initial margin amount is required to take a position in the futures contract. The margin amount varies for each month’s contract. According to information from brokerages, the margin requirement for the near-month (October) contract is around 9.3 per cent. So, if the contract is trading at ₹1,100 per kg and you buy one lot (100 kg) then ₹10,274 is the initial margin required. Apart from the margin amount, you will also have to shell out money on brokerage and service tax. Cardamom is exempt from the Commodities Transaction Tax (CTT)..

The price on the futures contract is influenced by the quality of the cardamom that arrives at the auction centres. However, some farmers think that it is the futures price that influences the price at the auction some times.

The MCX Cardamom contract sees an average daily spread of ₹20 and ₹25. The average daily turnover in the contract is about 1,300 lots.

Analysts who track the contract say it witnesses a surge in volumes during the peak season for cardamom, which is between July and September. Data from the MCX shows that the average daily volume for the month of August had shot up to 1,431 lots from 705 lots traded on an average in July.

People looking for physical delivery should note that it takes place only in Vandenmedu in Kerala.

Summer showers are vital

Cardamom is not a perennial crop and the life cycle of the plant is 12 to 15 years. February to May is the lean season for the crop. Initial preparation, manuring and other setting-up processes are carried out in this period. Summer showers are very important at this time as they aid in flowering and the conversion of flowers into fruits. This is followed by the onset of the south-west monsoon in June which helps in the process of flowering and fruit setting all through the season. A 40-50 day period is allowed between flowering, fruit setting and fruit ripening for picking. If the south-west monsoon is good, then about five to six rounds of picking can happen through the season for every 40-50 days, spanning July to January.

Cardamom farmers have the option to sell their produce either through auctions or directly to the traders. The Spices Board of India introduced the e-auction system in 2007. There are two authorised e-auctioning centres, one in Puttady, Idukki District in Kerala and the other in Bodinayakanur, Theni District in Tamil Nadu. Two auctions take place every day, one in the pre-lunch session and the second post-lunch. The auction takes place at only one centre on a particular day..

What determines prices

The factors that determine the quality, and in turn the price of the produce, are the mass per litre, colour and appearance. Litre weight, that is, the weight of cardamom per litre volume, if equivalent or more than 400 grams, is considered to be of fine quality; this will fetch a good price. Anything below 350 gmis considered poor quality. This may happen due to fewer number of seeds or pre-mature plucking. Dark greenish cardamom is considered the best. More shade in the farm and lesser exposure of the plants to sunlight will result in dull colours. “Thrips” or dotted spots on the cardamom or broken or split open ones are considered to be of inferior quality.

Published on October 02, 2016

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