Bearish spices market looks for a revival

It was a rather disappointing year for the domestic spices market. Truant rains, output contrary to earlier estimates and other factors, such as the sealing drive in the national capital, had stumped traders, putting the markets in a bearish mode.

Meanwhile, traders and growers are seeing hopes in the new year with expectations of markets getting bullish again.

Cardamom growers were in for a shock in 2006, as price realisation was unexpectedly lower. Traders and growers were simply confused over the volatility in the market. The season had opened on a bearish note, as average prices had dropped to Rs 230-250 a kg.

This was a rather unbelieveable market situation, as a 15 per cent drop in production was estimated during the beginning of the season. The heavy summer showers in April and May had destroyed a major chunk of the crop and production was estimated at the lower end at around 12,000 tonne.

The prices had shown a sharp increase by September and the best quality cardamom had fetched a tag of around Rs 550, with the average prices peaking to the level of Rs 350. But, thanks to a prolonged monsoon during October and November, there was an improvement in production, again affecting the market badly.

With the output touching 13,000 tonne "� higher than the estimated 12,000 tonne "� market forces reacted sharply, especially in the futures market. The average prices have once again dropped to Rs 230 a kg in spite of the reports of Guatemala expecting a lower crop in the next season.

Leading planters in Idukki opined that the sealing of commercial establishments in Delhi has badly hit the cardamom market, as local demand is at its lowest since November.

Meanwhile, market sources expect a better price realisation in the 2007 season that will begin by June-July, as there would not be a sharp increase in the production level.

The disappointing 2006 season may result in small growers shunning the spice, which will affect the production in the next season. Report from Guatemala are also encouraging, as imports from the country are expected to be lower next year.

"If there will not be a sharp increase in imports from Guatemala during January and February, the next season will be a promising one. We hope for a better season in 2007," said a leading planter of Idukki.

There had been a marginal fall in India's exports during April-October, as total exports touched 765 tonne valued at Rs 14.90 crore. During the same period of the preceding year, the total exports were at 929 tonne valued at Rs 17.76 crore. Market analysts predict a bullish new year for black pepper unlike 2006.

An estimated sharp fall in the crop is the main reason for the optimism in the new year. It is estimated that production in Vietnam, the world's largest producer of black pepper, will be short by 20 per cent at 100,000 tonne. The domestic output is also likely to be in the range of 40,000-45,000 tonne as against 60,000 tonne in 2006.

A leading Kochi exporter said there is absolutely no doubt over the increase in prices in the next year, as the world market mainly depends on Vietnam and India.

The International Pepper Community (IPC) also estimates a 20 per cent drop in global production during 2007. As an indication of the shortfall in supply, the fresh crop from the southern districts of Kerala has not geared up so far.

The other producing countries, such as Indonesia, Brazil, Malaysia and Sri Lanka, will be on a low profile, leading to a turnaround in the global pepper market in favour of growers.

The domestic pepper market had moved on a pessimistic note during the first half of 2006, with the prices in a range of Rs 6,500-7,500 a quintal. This was owing to the hectic exports from Vietnam, as that country's production had peaked to 120,000 tonne.

Vietnam had an average quotation of $1,400-1,450 a tonne for ASTA, while the Indian tag was $1,650. Exports from India had slowed down, owing to the price difference of nearly $200-250 between the two countries.

By June-end, coinciding with the slowdown in exports from Vietnam, the domestic market had gathered momentum, with the price going up to Rs 10,000 by July-end. The year's highest tag was registered on September 16, as the price touched Rs 12,900.

Export orders from countries such as the USA, Europe, Canada, Australia and Japan had helped the prices to move upwards. But, the upbeat mood continued only for a short while and by the end of the year, tags are hovering below Rs 10,000.

The announcement of export subsidy at the rate of Rs 5 a kg had helped the market touch the Rs 10,000 mark after a long gap, helping exports to perform better than those in 2005.

During the April-October period, the total exports had registered 54 per cent increase in quantity and 69 per cent rise in value. India had exported 13,825 tonne valued at Rs 128.78 crore compared with 8,971 tonne valued at Rs 76.32 crore in the same period in 2005.

The nutmeg and mace market is also hitching hopes for the new year, especially for the first half of the new year. With the season coming to an end, the market will run on the carry-over stock till the next crop hits the market by May-June.

But, contrary to earlier expectations, the prices had dropped sharply by November-end despite a tight supply position. Local traders had estimated a sharp increase in prices, as in 2005, owing to lower production estimates.

But, the prices of mace had edged to a maximum of Rs 450-460 a kg, dropping slowly to the current range of Rs 370-380. Likewise, prices of nutmeg (without shell) has dropped to Rs 170-180 from a high of Rs 220. Shelled nutmeg had quoted a high of Rs 110-120, but dropped to Rs 90-100 during the year.

The sealing of commercial establishments in Delhi had hit the nutmeg and mace market very badly, bringing their prices drastically down at the close of the season. Market sources had earlier expected a tag of Rs 600 for mace, as in 2005. But though the total production was marginally lower in 2006, the prices had not picked up as expected.

The preliminary indications from the growing areas show that production will be almost steady during the next year at around 2000-2200 tonne. A leading trader said an estimation of production is premature, as flowering of trees has just started.

But owing to an increase in the acreage, there will not be a sharp fall in the production of nutmeg. But, the movement of prices will mostly depend on domestic demand, as almost 60 per cent of the total production is consumed internally.

During April-October, the exports had dropped marginally at 1,085 tonne, down by 3 per cent, valued at Rs 21.35 crore, a drop of 4 per cent.

Prices of dried ginger had moved in a band of Rs 4,500-7,000 a quintal during 2006.

But the domestic market is strongly influenced by major producing countries such as China and Nigeria and the movement of the market in 2007 will also be controlled by these countries rather than internal supply and demand.

Production in the new season has already started and will pick up by the next month. According to recent estimates, the domestic dried ginger production will be in the range of 15,000-20,000 tonne.

The global market is not favourable to India, as Nigeria offers $950 a tonne and China's tag is of $1,050, while India's quotation is higher by $200-300.

It is also estimated that there will be a carry-over stock to the tune of 1,000 tonne and, as the season gathers momentum, there may be a drop in prices till March-April and a shift in prices is expected only afterwards.

India had exported 5,000 tonne valued at Rs 24.10 crore in the April-October period.