Undertone for prices of spices bearish; technical bounce back possible: Anand Rathi

After a significant fall, a technical bounce cannot be ruled out, but the undertone for the spice complex remains bearish amid the peak arrival period ahead.

Harvesting of rabi crops has sped up this month and arrival pressures (at mandis) are building gradually across market yards in India. Accordingly, prices of many rabi commodities have plunged citing pressure during the peak arrival period (March-April). Spices, in particular, have been trending lower for the past one month with turmeric losing around 7% while the falls in jeera and coriander were of 10-12%.

Harvesting of jeera has been delayed due to late sowing. Arrivals in February may be around 1-1.25 lakh bags (1 bag=55kg) this season compared to approximately 4 lakh bags in the corresponding period last year. Despite lower arrivals, we don’t see any upswing in prices considering that stocks are adequate.

Physical stocks of jeera in markets are much higher than last year. Meanwhile, per-hectare yield is better than expected, which would offset lower sown acreage, particularly in Gujarat. Arrivals would peak in March and April; accordingly, prices may come under pressure in the next two months.

The yellow spice, turmeric, is consolidating within a narrow range after a sharp fall earlier in the month. At present, the harvest of the new crops are coming only to the Nizamabad markets while supplies in other major markets including Erode, Sangli and Marathwada are from the old crop.

The demand-supply balance sheet of turmeric in the 2018-19 season may be more or less the same as last year. Opening stocks in the 2018-19 season are lower but higher output is expected (75 lakh bags) and may keep supplies near last year’s level. Thus, fundamentals are unchanged. In 2019 turmeric may closely follow seasonal price patterns; accordingly, we may see a downward shift in turmeric prices in coming weeks.

Coriander, too, is wilting under pressure ahead of the harvesting season. The coriander crop scenario, however, is exactly the opposite of that of turmeric. The coriander crop is in a very bad shape this season, particularly in Gujarat.

Sown area under coriander declined 58% in Gujarat in the 2018-19 season. In other major producing states, the crop is better, but may not suffice to make up for the losses. Thus, unlike other spices, the downside in coriander would be limited this season even during the peak arrival period.

To conclude, after a significant fall, a technical bounce cannot be ruled out, but the undertone for the spice complex remains bearish amid the peak arrival period ahead.

Disclaimer:-The views and investment tips expressed by investment experts are their own. Ripples Advisory advises users to check with certified experts before taking any investment decisions.

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