Jeera Special Report 18-07-2012 -...
Transcript of 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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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
Jeera Special Report
Wednesday | July 18, 2012
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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
Jeera Special Report
Wednesday | July 18, 2012
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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
Jeera Special Report
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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.