Monsoon rains cap spice market rally

Written by RajeshRavi | Kochi | Updated: Sep 12 2012, 08:24am hrs
A turnaround in the monsoon rains has capped a rally in spices as new estimates report of higher than anticipated yield in most of the crops. Spices like turmeric, chilli, pepper and jeera have moved up in the spot and futures market on fears of lower production due to drought.

A sharp correction has taken place in jeera, coriander and chilli due to better rains in August. Rally in pepper prices have been capped, Faiyaz Hudani at Kotak Commodity Services, said. Fears of a drought like situation has been averted and farmers are responding to the situation by sowing new crops. Soil moisture has improved in most of the areas and it has helped in the positive sentiments, he added.

According to the Meteorological Department, the deficit in the seasonal rainfall (from June 1 to September 9) has declined to 8.7% from over 22% in mid July. Merrill Lynch reports that the revival of rains should save the winter crop from drought and Indus waters, a proxy for moisture conditions in north Indian wheat fields, have now risen to 94% below normal from 55% in mid-July.

The month of August saw the country receive 264.7 mm rainfall as against the normal of 261 mm, showing an excess of about 1%.

According to the Meteorological Department, the country received 31% less rains in June while July saw a monsoon deficiency of 13 %.

Recovery of monsoon during last month has led to a correction despite the fact that sowing area in some crops like turmeric are on the lower side. Traders expect an improvement in yield, Vedika Narvekar of Angel Commodities said. Jeera prices corrected the most with a sharp decline of 10.3 % from R16,580 per quintal in August 4 to R14,871.Chilli prices fell by 6.9% from R5,997 per quintal in July 25 and turmeric too declined by 6.7 %, she added.

Rains in August will help the kharif crop in its growing stages and production will be better than the initial estimates formed while the rains were lower than normal, Chowda Reddy, senior analyst with JRG Wealth Management said.

Continuous and steady moisture supply is essential for the growth of pepper berries after the initiation of spike.

Extended dry period leads to staggering of flowering and the berry maturity also gets delayed. Similarly, cardamom also needs incessant rains and moisture for good yield.