The Turmeric Product Advisory Committee (PAC) set up by the National Commodity and Derivatives Exchange (NCDEX) has stated that futures trading ensures transparent price discovery for all the stakeholders in the commodity value chain and future prices provide a benchmark for the physical trade as well.
Stating that the amount of transparency that derivatives market brings to the system is ‘unmatchable’, the PAC, set up under the Security and Exchange Board of India guideline, in its report submitted to finance ministry said turmeric price being discovered on NCDEX is for single standard grade while the crop thatr comes to the physical market for sales varies in quality.
“The prices of the turmeric quality traded in physical and bourses do not show any unusual fluctuations, while futures prices help participants in the value chain in hedging prices,” Punam Chand Gupta, a Nizamabad based turmeric trader and chairman of the committee, told FE.
PAC’s report comes in the wake of demand of some turmeric traders from Marathwada and Vidarbha regions of Maharashtra to ban futures trading of the commodity, as they feel it leads to speculative trading. It stated that the average variations in prices is about 30% between the minimum and maximum prices, at times going up to 80% because of quality variation in the crops.
The committee had held a meeting last month in Mumbai to review the product and the recent concern of Marathwada and Vidarbha traders.
“Turmeric future price is a benchmark price for farmers and helps masala companies and exporters in procurement by giving them fair idea about the future price predictions,” Ankit Agarwal, Director, Amar Agarwal Foods India Pvt Ltd, Erode, Tamil Nadu-based turmeric trader, said.
He said that there was a spike in prices earlier this year because of reports of possible crop losses. But after harvesting of the crop, from April onwards prices have been stable. “Prices have been reverting to normal range of Rs 7000-8000 a quintal from the spiked prices of Rs 10,500-10,700 a quintal prevailed earlier this year,” Agarwal said.
Turmeric spot price was quoted at Rs 7372 a quintal on September 8 on NCDEX while future price for October 20, 2022 was Rs 7092 a quintal. Nizamabad (Telangana), Basmat (Maharashtra) and Erode (Tamil Nadu) are the key markets for the turmeric trade.
Parivartan Organic Farmers Producer Company, based in Karanja, Washim district, Maharashtra has stated that through futures trade they have been able to hedge future price risk and advocated against restricting turmeric future trade.
According to trade sources, less one per cent of the commodity is traded on the commodity bourse.
“The price discovery for any commodity on the exchange platform is entirely a work of market forces and the exchange has absolutely no role in it,” Arun Raste, MD & CEO, NCDEX said.
Raste said the PAC of the exchange for any product has representation from value chain segments, spread across geographies and production centers, and PAC opinion and suggestions are taken into account for the design of a new contract.
Turmeric sowing commences with onset of monsoon in June, harvesting is carried out from February onwards. Maharashtra, Telangana and Andhra Pradesh are the major producers of the spice variety in the country.
Turmeric production was 0.46 million tonne in 2022, which is an increase of more than 9% from the previous year.