In an unusual situation this week, far-term turmeric contracts were trading much below near-term ones, offering a big arbitrage opportunity for hedgers and speculators, on the National Commodity & Derivatives Exchange (NCDEX). The price difference was 39 per cent.
Generally, the near-month contracts are priced lower than the far-month ones, as the latter include the current price plus the carrying cost. However, on Wednesday, contract for delivery in December was traded at Rs 9,516 a quintal, a fall of 22 per cent within a fortnight, which traders attributed to an erosion in local and export demand. Prices were ruling at a lifetime high of Rs 12,191 a quintal only a fortnight earlier, on reports that the output may decline over 60 per cent this year.
Against that, the contract for delivery in April was traded at Rs 6,850 a quintal on apprehension that the new year crop would hit the market around the settlement and delivery time of this contract.
Due to the huge price volatility, NCDEX imposed an additional special margin of 10 per cent on the long side of all turmeric contracts from last week. This resulted in speculators continuing to offload their positions.
Prices are unlikely to decline further, said Amol Tilak, an analyst with Kotak Commodity Services. The current level offers a good opportunity for trades to build their position, as stocks from last year have been almost exhausted. The new crop is likely to hit the market only in April, with a delay of over a fortnight due to late sowing and maturing of the crop. Hence, prices are likely to rebound, Tilak added.
Last year’s carryover stock is estimated to have declined steeply, at around 150,000 bags (a bag is 70 kg) as of today, as compared to around 700,000 bags around the same time last year. On Tuesday, turmeric prices were quoted at Rs 13,200-15,200, against the previous closing of Rs 13,500-15,500 a quintal, as traders estimated a recovery in yield through recent rains. Spice prices fell sharply by four per cent to hit the lower circuit in the futures market. Demand from local and export markets has eroded, as buyers are staying away from fresh bookings, an analyst said.
Turmeric exports climbed seven per cent to 4,000 tonnes in October 2009 from the same period last year. Weak turmeric futures put downward pressure on spot markets, to send the product down by Rs 800 a quintal.
In Sangli, the Rajapuri powder quality ruled in the range of Rs 11,500-12,000 a quintal, Rajapuri medium quality at Rs 12,200 a quintal, Rajapuri powder extra at Rs 12,500-12,700 and Desi Kadappa at Rs 11,500-12,200 a quintal. Nizamabad quality unpolished was Rs 10,500-11,000 a quintal and Nizamabad quality polished between Rs 11,500-11,800 a quintal.
Arrivals at the Erode market were 2,000 bags and sold at Rs 10,900-11,000 a quintal. In Duggirala, prices were placed at Rs 9,800-10,500 a quintal and in Warangal at Rs 9,900-10,500 a quintal.
