Market’s Dip – A Spice Rollercoaster Ride Comes to a Halt
Once a high-flying spice ride, the turmeric market has witnessed a downturn over the last 4-5 months. A critical factor in this descent was the conniving maneuvers of big speculators in the futures markets. Massive forward deals were offloaded, mainly settling after December’s closure. With future market deliveries dwindling, a potential uptick of $0,12 or €0,11 per kg is anticipated in January, signaling a possible resurgence before the new crop arrives. Presently, the spice market is in a lull.
Speculators’ Game – A Speculative Soar and the Sudden Fall
Last season, turmeric production dropped by 40%, coupled with adverse weather conditions. A trove of old stocks, dormant for years, was suddenly thrust into action. Speculators engaging in relentless buying and big players conspiring in the futures market caused prices to soar to a staggering $1,93-$1,94 or €1,46-€1,47 per kg by June. By October, the fervor reached $2,10 or €1,77 per kg, continuing until December.
As the specter of delivering the sold goods loomed, speculators, in tandem with the futures market, orchestrated a market downturn, plummeting below $1,57-$1,59 or €1,33-€1,34 per kg. Futures trading, active until December, naturally led to the market’s slump. January, February, and March futures are absent, with trading resuming directly from April onwards, sparking market fluctuations.
Tight Supplies and New Crop Pressures
While the turmeric supply has diminished, with external trade traders witnessing a 10% reduction, the new crop will face pressure around mid-March. Unfavorable sowing conditions, adverse weather, and crop spoilage have contributed to a volatile situation in some regions. The total production for the current season is estimated at 5.6-5.8 million bags, with an additional 1.0-1.1 million bags of old stock totaling around 6.6-6.8 million bags for the season. With domestic and export consumption of bags at 1.25 billion, traders are gaining confidence despite the recent downturn.
With three months until the arrival of the new crop, prospects for a price reduction seem bleak. Furthermore, international markets’ reduced prices have prompted local exporters to seek Indian turmeric, indicating a potential export boost. Currently, turmeric sourced from Erode is priced higher than local purchases, leaving minimal room for a price reduction.
In the face of market volatility, the recent price decline has sparked renewed interest from traders. With the looming arrival of the new crop, strategic buying at the current price is a profitable move. The international demand for Indian turmeric, despite reduced prices, indicates a positive trend, positioning the spice market for a potential resurgence.