jeera special report 18-07-2012 -...

Jeera Special Report

Wednesday | July 18, 2012

www.angelcommodities.com

Content

Overview

Price Performance

Domestic Production

Trade Scenario

Global Scenario

Fundamental Outlook

Technical Outlook

Anuj Choudhary- Research Associate [email protected]

(022) 2921 2000 Extn. 6132

Angel Commodities Broking Pvt. Ltd.

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feedback is appreciated on [email protected]

Prepared by

Vedika Narvekar- Sr Research Analyst [email protected]

(022) 2921 2000 Extn. 6130

Anuj Gupta- Sr Technical Analyst [email protected]

(022) 2921 2000 Extn. 6137




Overview

Cumin Seed (also known as Jeera), the second most important spice in the world after pepper,

has observed a significant increase in the Indian production in 2011-12 season after a sharp drop

witnessed in the preceeding two years. Thus, the peak harvesting period of this spice i.e. February to

April, saw a sharp drop in the prices on the back of increasing availability of Jeera in the domestic

markets. Nevertheless, adverse crop situation in the other producing and exporting nations of the

world, i.e Syria and Turkey and competetive rates of Indian origin, led to a sharp rebound in the Indian

Jeera prices since May 2012.

Price performance

Jeera prices plummeted by almost 23% in the spot

markets from a high of Rs. 16200 per qtl in the

month of January 2012 to touch a low of Rs. 12425

in the month of April 2012. Prices declined mainly

owing to increased production that rose a whopping

66% from 1.32 lakh tonnes in 2010-11 to 2.2 lakh

tonnes in 2011-12 and thereby increased availability

of the spice during the peak arrival period.

However, with declining arrival pressure, Jeera

prices bottomed out in the month of April and

started rising gradually. Further, robust export in

2011-12(FY) from India, and reports of lower output

in Syria and Turkey led Jeera prices to surge more

than 24% since then from Rs. 12425 to Rs. 15450 per

qtl in the three month time span.

Production and Consumption

Despite acreage remaining constant between 3 and

5.5 lakh hectares since 2001, the production trend of

Jeera has been highly fluctuating on account of

erratic weather conditions, pests and diseases

during the sowing or harvesting of the crop.

However, in 2011-12, the area under Jeera

cultivation in the largest producing state, Gujarat

(72% share in Indian production), increased sharply,

leading to higher production of the spice crop in

2012.

According to Gujarat farm ministry, area sown under Jeera stood at 3.682 lakh hectares (lh) up 50% as

compared to last year. Further, weather conditions also remained favorable, leading to higher yield.

Jeera production in 2011-12 is estimated around 38-40 lakh bags of 55 kgs each (or 2.2 lakh tonnes) .

This is higher by around 10 lakh bags as compard to 29 lakh bags (1.32 lakh tonnes) produced in the year

2010-11.

Source: Reuters and Angel Research

Source: Spices Board and Market sources




2011-12 exports up 40% yoy- 2012-13 exports to breach last years level

In the financial year 2011-12, although exports in quantity terms increased by almost 40% on year, in

value terms it surged by a whopping 62% and touched record high levels on the back of weak Indian

currency. According to Spices Board of India, exports of Jeera during April 2011- March 2012 stood at

45,500 tonnes as compared to 32,500 tonnes in 2010-11. In the first month (April) of current FY 2012-

13, exports stood at 2,500 tonnes up by 6% compared to same period last year.

For the financial year 2012-13, Spices Board has targeted 45,000 tonnes of exports. However,

considering the crop failure in the other major producing nations and comparatively higher production

in India, exports may cross the target set by the Spices Board.

On the trade front, India is not only the leading

producer and consumer of this spice but is also the

largest exporter in the global markets. Overall

exports from the country have been on the rise,

owing to the decline in output in the other

producing regions viz. Syria. Moreover, with Jeera

sowing in the country taking place in October and

harvests in February, the fresh crop from India

comes into the market when it is the ending

season in the other major producers, adding to the

gains in India’s Jeera exports. UK, USA, Brazil, UAE,

Nepal, Malaysia and Pakistan are the main markets

for India’s Jeera. These countries together account

for 44 percent of the country’s Jeera exports.

Global scenario

Although India holds a giant share of around 70% in the

global jeera production, the fundamentals of other

major producers like, Syria and Turkey also have a

significant role in determining the Jeera prices. This is

because Syria that holds a share of around 16% in global

jeera production, consumes only 14% of its output and

exports a large portion in the global markets.

In the current context, due to unfavorable weather

conditions, the production in Syria and Turkey are

expected to fall, affecting the global supplies of this

spice. Production in Syria is estimated around 17,000 tons, lower by 20%, while the production in Turkey

is estimated around 5,000-7,000 tons, lower by 40-50% respectively. In addition, the ongoing tensions in

Syria, may also have an adverse impact on the exports. Due to this, the availability from these two

exporting countries is likely to fall drasctically and export orders are likely to be diverted to India.

Source: Spices Board

Source: Market Sources




Fundamental outlook

With increased availability of Jeera in the domestic markets and lower output in other major exporting

countries of the world, India has a good oppurtunity to liquidate their surplus stocks in the global

markets. Also, with competetive prices of the Indian Jeera compared to other origins, buyers may turn

to India to meet their import obligations. Jeera prices in the international market of Indian origin are

being offered at $2,675/tonne (c&f) while Syria and Turkey are offering their produce at $3,300/tonne

and $3,300/tonne respectively (fob). Thus, we expect Jeera prices to remain firm in the short to medium

term. However, October onwards, prices would take cues from sowing progress of Jeera in the domestic

markets. Considering higher returns, if area under cultivation increases in the next season, then prices

might witness downward pressure thereafter.

Technical outlook

On the above daily NCDEX Jeera August contract price chart, we, we could clearly observe that prices

are trading in a bull run from past couple of weeks. Positive pattern Higher Top and Higher Bottom is

also observed on chart which suggests that prices will follow the same trend in the coming days.

Technically speaking, the prices of NCDEX Jeera August are trading above its 9, 18 & 50 days Exponential

Moving Average (EMA) and MACD is also in positive zone which suggest further upside in Jeera prices,

but 14 Day RSI at 68 levels is near its overbought zone which suggest some correction or buy on dips. All

these indicators point towards further upside in the Jeera prices in the short term.

Prices are having support at 15500 - 15600 levels then 14900 levels, while resistance may be seen at

16500 levels. If prices trade and close above 16500 levels on daily basis then it will trigger a rally till

16800 levels to 17000 levels.

Strategy Buy NCDEX Jeera August between 15500 - 15600, Stop Loss - 14900, Target 1 - 16500 & Target

2 – 16800.

jeera special report 18-07-2012 -...

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