CUMIN PRICES UNDER PRESSURE

After touching its all-time high in May, jeera (cumin) prices have been caught in a continuous downtrend. The weakness in price since late May can mainly be attributed to limited export demand on availability of lower quality jeera at relatively higher prices. The quality of jeera this year was down due to unseasonal rains in Rajasthan and Gujarat during the harvesting season in March 2015.

This downtrend is expected to continue for some time, with the possibility of recovering to its high levels during the start of the sowing season in October on expectation of higher export demand, as new arrivals will only come next March. Moreover, the progress of the monsoon and size of new crop arrivals from Syria and Turkey in August and September will also determine the price trend.

Price Performance

In 2015, jeera prices have surged during the peak arrival season, which was quite unusual. It touched a four-year high in April and again surged to a historic high of Rs 18,450 per quintal in May, which was an increase of more than 21 per cent since April and about 27 per cent since March. The spot prices were around Rs 14,560 per quintal in February and Rs 15,230 in April. The unusual surge during the peak arrival season is due to reports of lower production and higher demand for good quality jeera. Now, during the off-season, the prices have corrected to Rs 16,327 levels as traders and stockists are releasing their lower quality jeera at higher price.

Similarly, the active August contract has also tanked by about 16 per cent to Rs 15,115 per quintal on the National Commodity and Derivatives Exchange (NCDEX) in the last two months mainly on account of limited export demand due to quality issues. Despite these quality problems, the current spot jeera price and futures’ prices are 42 per cent and 34.5 per cent higher compared to last year’s prices during the same time. The main fundamentals which drive jeera prices in India are the production estimates, acreage, export demand, climate conditions during crop development, and quality.

Production Area

India is one of the largest producer and consumer of cumin. It is exclusively cultivated during the Rabi season (October-March) mainly in Gujarat and Rajasthan on conserved soil moisture. The annual production of jeera in the country fluctuates between 2-3 lakh tonnes. In 2014-14, India produced more than 3.4 lakh tonnes (lh) jeera. However, in 2014-15 the production is estimated to be about 2.5 lt due to a lesser acreage planted in Gujarat. The area reduced by 42 per cent in Gujarat as farmers planted more of coriander, funnel and fenugreek seed due to realisation of low price of jeera over the past two years.

Moreover, unseasonal rains and hailstorms, especially in Rajasthan and Gujarat, damaged the standing jeera crop, which was ready for harvesting. There was also a loss of quality due to the seeds turning black. According to the Ministry of Agriculture, around 2.14 lh jeera crop has been damaged in Rajasthan while 9,000 hectares has been damaged in Gujarat. Thus, domestic jeera production is projected at 2.5 lt, down 24 per cent compared to last year. Besides India, cumin is also cultivated in Iran, Turkey and Syria, which harvested during May-July, much later than the harvesting in India. Thus, India has an early advantage of exporting to international markets.
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High Exports

India is the world’s largest jeera exporter. In 2014-15 the exports are at an all-time high due to geopolitical concerns and a crop failure in the other two major exporting countries i.e. Syria and Turkey. As per Spices Board India, the country exported 1,55,500 tonnes of jeera in 2014-15, 28 per cent higher compared to last year’s export of 121,500 tonnes. India mainly exports jeera to Vietnam, USA, UAE, Egypt, Nepal, Spain, Brazil and the UK. Jeera is the second-largest spice exported from the country after chilli in terms of volume.

Monsoon Progress

As per the Indian Meteorological Department’s (IMD) data, monsoon rains in the jeera production regions of Gujarat and Rajasthan have been normal to excess during June and July. The rains during the last two months in Gujarat and Kutch were recorded at 36 per cent higher than the normal average while in western and eastern Rajasthan there has been an excess of 114 per cent and 31 per cent respectively. Until half way of the monsoon season, the prospects are best for jeera sowing during Rabi. However, monsoon progress during August and September will be vital for the good sowing of jeera.

Outlook

Jeera prices this year were at the highest levels as compared to last three years during the peak arrivals season (April-May). This surge in price is a clear indication that there will be good demand for jeera among the stockists and traders on expectation of good export demand after assessing the new crop coming from Syria, Turkey and Iran. Jeera prices were in the red during the last two months as physical buyers are eyeing delivery from the National Spot Exchange Limited’s platform at lower prices. In the domestic market, good quality jeera is stored in NSEL warehouses, which have to be released four months from the date of storage.Thus, sellers have to compulsorily give delivery of jeera or exit the sell positions as revalidation is not allowed. The sentiments are also weak on higher than expected rains in Gujarat and Rajasthan. Overall, jeera fundamentals are looking quite tight due to relatively lower carry-over stocks of export quality jeera and any adverse weather conditions and increased export demand may surge prices as the new crop from India will only come in March next year.

Strategy: BUY NCDEX JEERA between 14,700 – 14,800, SL – 14,100, TARGET – 16,500 (CMP – 15,200).