Turmeric price moves south, downward pressure builds

By Manoj Kumar Jain

Turmeric prices on the NCDEX moved lower by 20 per cent in the last three months amid expectations of a better crop for the second straight year. The softness in price comes as the fresh lot starts arriving in mandies amid improved prospects of output in Andhra Pradesh, Telangana and Maharashtra.

In Tamil Nadu, the production is lower this year, hit by rain deficit in the state. But the shortage has been compensated by other states. Stockists did not turn aggressive buyers at that point on expectations of a further decline in prices as export demand slows.

India is the largest turmeric producer with 75-80 per cent of the global pie. Demand for the commodity has seen a sharp upswing, mainly from the medicinal and cosmetic industry. However, the pressure in the market is because of fresh arrivals and this may depress the prices further.

Lower carryover is seen to support the market in the medium and long run as the current stock of 6 lakh bags is shorter than 10 lakh bags a year ago.

Turmeric prices hit a record high of Rs 16,350 per quintal in November 2010 and touched a low of Rs 3,360 in 2012. In the short term, turmeric futures are expected to trade sideways owing to weak physical demand and higher supplies in mandies.

The arrivals went up in December this year rose to 19,938 tonnes, from the previous 10,922 tonnes, according to available data. The export of the commodity is down 17 per cent to 63,395 tonnes for the first 7 months of 2017-18.

Increased global demand for turmeric, especially in the pharmaceutical sector, drove its exports to 1,16,500 tonnes in volume and Rs 1,241 crore in value terms in 2016-17. There are expectations of improved demand in coming months from the export market.

Curcumin content of turmeric is a key factor that decides the price of the commodity and trade. Indian
turmeric has the highest curcumin content, which explains why it is preferred by extractors and grinders alike.

Looking at current fundamentals and the crop report, turmeric will be under pressure in the short term. But it will draw support at lower levels on export demand revival in the next few months. Turmeric on the NCDEX will find comfort in the price range of Rs 6,000-5,800 per quintal.


Technical view:
Turmeric futures on the NCDEX have faced headwinds of late and breached the import support level of Rs 6,770 on the chart. The contract still looks weak on the chart and a decisive break and close below Rs 6,500 level will emerge from a fresh round of selling in the contract.

If the contract is able to hold Rs 6,680 levels, a relief rally is possible till Rs 6,800-6,900 levels. The long
term trend will be reversed only when the contract is able to sustain itself above the Rs 7,100 level.

Looking at the technical chart, we expect turmeric will live with more pressure in days to come and could further correct till Rs 6,350-6160-6000 levels. The resistance zone is Rs 6,680-6,800.

Recommendation:
Traders can sell turmeric in the range of Rs 6,500-6,600. Stop loss is above Rs 6,850 on a closing basis with the target of Rs 6,350-6,160.

Disclaimer: Above view in the report is the author's own and traders should take advice from their financial advisors before investing. Investment in commodities is subject to market risk.

(Manoj Kumar Jain is Director of Commodity and Currency at IndiaNivesh Commodities. He has 20 years of experience in financial service sector. Views expressed in this article are author's own and do not represent those of ETMarkets.com. Readers are advised to consult their financial advisers before taking any position based on these observations)