Turmeric to stay bearish despite damage to crops

Domestic turmeric prices are likely to fall, shrugging off damage caused to the stocks owing to floods in key spice growing areas, traders and analysts said Thursday. The bearish trend will be in anticipation of bountiful harvest in January, they said.

About 20,000 turmeric bags (1 bag=70 kg) in key producing regions of Duggirala in Andhra Pradesh and Sangli in Maharashtra were damaged owing to heavy rains, traders and analysts said.

The loss of the stock may not have deep impact on prices in the long-term, said, Kishore Narne, research-head, Anand Rathi Securities. "We believe turmeric prices will start falling once the news of expected higher crop in January sinks in. Prices are likely to fall despite damage to the turmeric crop in Maharashtra, Andhra Pradesh," he said.

Turmeric is primarily produced in Erode in Tamil Nadu, Nizamabad and Duggirala in Andhra Pradesh, and Sangli in Maharashtra. India is world's largest producer of the commodity. Total crop for the next season starting January is pegged at 5.5 million bags, up 20 per cent from the previous season. Total consumption is estimated at 3.5-3.8 million bags.

The carry over stock of turmeric for 2006 is expected to be 0.5 million bags, a report by Anangram Stockbroking Ltd said.

Narne said the carry over stocks will take care of the domestic demand and consequently prices will ease in the medium-term.

Buoyed by the reports of impressive crop next year, Kulin Shah of Mumbai-based Pradip Commodities, said, "We are quite bullish on the next year's crop, which is pretty high than the previous season."

January's higher crop is primarily attributed to a higher production in Andhra Pradesh and improvement of yields in Tamil Nadu, Narne said.

The seeds of falling prices have already been sown as traders have stopped buying in bulk and avoid hoarding despite damage to the crop. Also, traders are not buying in bulk as they await bumper crop in January, Shah said.

A large quantity of turmeric stocks stacked in under ground storages and open warehouses of Sangli were damaged while those kept in cold storages remained unscathed.

Some of the running stocks stored in the underground and open warehouses found their way into some of the interior markets of the country in the form of turmeric powder, a turmeric exporter said.

On exports, a Sangli-based trader said shipping the commodity in overseas markets have not been hampered even as the crop was damaged extensively after late rains in some of the important turmeric growing regions.

Though turmeric prices are seen falling in anticipation of a bumper crop in January, there may be a slight increase in prices in the short-term, analyst said.

However, turmeric futures will go up marginally for a short span of time, a Mumbai-based trader said.

October turmeric futures are likely to go up by Rs 10-15 (per 100 kg) on back of festival demand, the said.

The trader, however, said the December contract is likely to remain low on lack of demand as most of the festive demand would have been exhausted.

Also, with the new crop's arrival in the physical markets in January, traders will be willing to purchase the new crop rather than the old lot, the trader from Mumbai said.

"The October contract is likely to face resistance at 1,588 rupees per 100 kg and the support is seen at 1,520," Narne said.

Narne also said the November futures are likely to see resistance at 2,480 rupees per 100 kgs.