Turmeric seen down on low demand

Low domestic and export demand coupled with expectations of huge carry forward stock to the next season (January-May) is likely to keep India's turmeric prices bearish for the next 3-4 months, analysts and traders said today.

"The current market trend indicates that turmeric prices are likely to remain weak for the rest of the year," said Jitendra Nagla, proprietor of Nizamabad-based Neelkanth Corp and Jagnathji Industries.

Despite a decline in the estimated crop output, prices are seen down due to higher carryover stock, said Kunal Kothari, analyst, Samarth Commodities.

PRICE TREND
Over the last few sessions, turmeric futures have been moving sideways with a negative bias on lack of good demand in spot market.

On Thursday, the National Commodity and Derivatives Exchange (NCDEX) cut penalty levied on sellers defaulting on delivery obligation, to 2.5 per cent from the current 8.0 per cent.

"The reduction of penalty has put buyers at a loss due to which traders have lost interest in trading, thereby pulling prices down," said Kothari.

Reports that the stock at the NCDEX-accredited warehouse at Warangal have been damaged also contributed to the fall in prices, traders said.

When contacted, an NCDEX official said the exchange has not received any complaints about damaged stock.

Spot prices have already fallen sharply during the last few days and are expected to decline further by Rs 200-300 in the coming days, said Nagla.

Prices are likely to move in a range of Rs 1,700-1,800 a 70 kg, he added.

In Nizamabad, prices of sadhashiva variety have dropped by Rs 20-30 to Rs 2,033 a 100 kg so far this month.

In Sangli, prices of the superior garbha variety declined by Rs 20-30 over the last couple of sessions to settle in the range of Rs 2,000-2,250 a 100 kg.

HIGHER STOCK
Currently, turmeric prices are down on account of huge carryover stock of around 275,000 bags (1 bag=70 kg) from the last season coupled with steadily rising inventory at NCDEX warehouses, a Karvy Comtrade report said.

In Sangli spot market, the stock of around 175,000 bags (1 bag=80 kg) and expectations of arrivals of 4.5 million bags of turmeric in the new season are seen pulling down prices.

Nizamabad spot market also has huge stock and it is seen increasing by 1.8-2.0 million bags (1 bag=70 kg) in 2008.

Turmeric is a seasonal crop. Arrivals take place twice a year""from January to May and from mid-August to October.

Carry forward stock is expected to be 1.0-1.5 million bags during the new season (January-May) in 2008 from around 700,000 bags last year, said Subhash Chandra Gupta, an Erode-based trader.

Festive season demand would not help offset the weak trend caused by huge inventory, said Satish Doshi, a Sangli-based trader.

Also, there may be huge selling pressure, as farmers would be interested in disposing their stock before the fresh crop arrives in January. This is likely to weigh on prices, dealers said.

LACK OF DEMAND
The persistent sluggish domestic demand is also likely to keep the market bearish in the long term, traders and analysts said.

"There is slight demand for turmeric from West Asia, but it has not improved the price trend on account of the continuously appreciating rupee," said Satnarayan Sabu, a Nizamabad-based trader.

The rise in the rupee hits exporters adversely. The Indian unit was at Rs 39.54 a $1 today.

Rupee has risen against the US dollar by over 12 per cent since January.

Traders expect the domestic demand to rise slightly ahead of the nine-day Navratri festival, which commences on Friday.

Also, the likely uptrend in other spices during the festival season would restrict any downward movement in turmeric prices, Kothari said.