Cumin prices likely to drop on supply glut

Spot and futures prices of cumin seeds are likely to go through a bearish phase in the next three weeks on heavy crop arrivals coupled with sluggish demand in the domestic as well as export markets.

New crop arrivals from the Saurashtra region of Gujarat have commenced and they are expected to pick up pace this month, traders said.

"In the last couple of days 1,000-1,500 bags of cumin seeds (1 bag=60 kg) arrived in Unjha (Gujarat). Already, the market has good amount of stocks from previous year's crop," said Bhanu Bhai, a trader in Unjha.

However, in the long term, prices are seen entering an upward phase on emerging global supply tightness.

"As arrivals in Unjha (a key spot market for cumin seeds) pick up, prices could come down," said Shikha Chakraborty, research analyst at Anand Rathi Commodities.

Traditionally, arrivals are very heavy during the Shivaratri festival, which falls on February 16, said Chakraborty. Adequate stocks at National Commodity and Derivatives Exchange-accredited warehouses would also lend a bearish mood to prices, traders said.

As on January 31, cumin seeds stocks at NCDEX warehouses were 8,130 tonne, of which 6,215 tonne were in Unjha warehouses.

Spot and future prices have already started exhibiting weakness.

In the last 10 sessions, March delivery on NCDEX has declined by 3 per cent to Rs 9,168 a quintal. Spot prices in Unjha, in the last five sessions alone, fell by Rs 194, or 2 per cent, to Rs 9,200 a quintal.

Arrivals from Rajasthan, which sows the crop later than Gujarat, would commence post Holi, traders said.

"Export demand is also slack at the moment, keeping prices under wraps," said Vinayak N V, analyst at Karvy Commtrade. However, a sharp fall is unlikely, as traders are likely to buy on dips, he said.

Long-term bullish outlook for jeera would prevent prices from sliding, said Vinayak.

According to Vinayak, March contract on NCDEX would find support at Rs 8,940 a quital and face resistance at Rs 9,600.

"Traders should buy at Rs-8,940 levels. But if this support level is broken, then they should wait until prices dip to Rs-8,400," Vinayak said.

Chakraborty also expects March contract to touch Rs 9,100 levels next week.

Spot prices would move in the range of Rs 8,000-9,000 a quital in the next one-month, said Arun Bhinde, a Mumbai-based trader.

Emerging global supply tightness is expected to drive jeera prices upward once local arrivals peter out, analysts said.

"Once arrival pressure is over, it is a bullish phase for jeera due to low domestic production and strong export demand, as Turkey and Syria are likely to see a fall in crop," said Kaushal Shah, analyst, Motilal Oswal Commodities.

Country's cumin seeds output in 2006-07 (October-March) is seen at 2.4 million bags, compared with 2.8 million bags in the previous season.

Output is down as farmers in Gujarat opted for other crops in view of better prices. "Also, cumin seed is a risky crop, as it is easily subject to the vagaries of weather," said an analyst.

Though the country's production is lower than the previous year, it would benefit from global shortage of the commodity.

India, the world's leading producer of jeera, may end up being the only market for sourcing jeera as crop in other producing countries is seen sharply down, Vinayak said.

India exports cumin seed to Bangladesh, China and West Asian countries.