TURMERIC SEASONAL REPORT

7th March 2008

Market Review

Since October 2007, the active May contract turmeric prices were on Bull Run on extension of

strong support from fundamental factors like rising domestic demand from stockiest on

speculation of decline in production from the current year crop to the extent of 7.5 lakh tonnes

against to 8.9 lakh tonnes harvested last year. Despite of higher carry forward stocks around one

lakh tonnes, prices moved in northward direction from launch of May contract on domestic

exchange. Prices edged up indifferently from bottom level of Rs 2358 levels and posted a high at

Rs.2725 in the month of December on aggressive buying by stockiest coupled with export

demand from Dubai, Middle East and Bangladesh. According to Spice Board of India, from

April to October 2007 exports from India pegged to 30,500 Mt, which is higher than last year’s

figure of 29,200 Mt during the same corresponding period.

Prices after testing a high at Rs. 2725 slightly corrected towards Rs.2620 levels on liquidation of

long positions. Later on prices resumed its bullish trend on support from following fundamental

factors:

• Lower production estimates gave strength to the bullish sentiment in the market

• Recent unseasonal rainfall in major producing areas hampered the quality of stock by

raising the moisture content than desired one (12per cent)

• Unfavorable rains restricted the arrivals and resulted in limited arrivals to the market

during February month.

• Moreover, farmers are not interested to offload the stock in the market, in anticipation of

further rise in prices in future days.

• Artificial shortage of stock gave scope to speculative buying in the market

• Strong domestic demand from stockiest and

• Andhra Pradesh co-operative society (AP Markedfed) started procuring the stock from

farmers at Rs.3000 levels per quintal.

And in recent past prices tested a historical high at Rs. 3573 levels per quintal on aggressive

buying by stockiest in the market. Beginning from launch of May contract, prices have shot up by

51.48per cent with in period of one quarter .where as in spot, prices increased from Rs.1900

levels to Rs. 3100 levels.

Turmeric Back Ground:

Turmeric is an important commercial spice crop grown in India and it is named as “Indian saffron”.

Indian turmeric is considered the best in the world due to presence of high curcumin content.

Botanically it is named as Curcuma longa L. It belongs to family Zingiberaceae. Commercial part is

rhizome or underground stem. Indian vernacular names are pasupu, haldi, manjal etc.

Diversified uses:

Turmeric is used in diversified industries as condiment, as flavoring and colouring agent,principal

ingredient in Indian culinary as curry powder. Oleoresin extracted from turmeric is used in brine pickles,

to some extent in mayonnaise, relish formulations, in non-alcoholic beverages, gelatins, butter and

cheese etc. The colour curcumin extracted from turmeric is used as a colorant.

Turmeric is also used as a dye in textile industry, in cosmetics, preparation of medicinal oils, ointments

and poultice. It is stomachic, carminative, tonic, blood purifier and an antiseptic. The aqueous extracts

have biopesticidal properties.

Seasonality in India

Turmeric is a seasonal and annual kharif crop. Its crop duration is generally 7-9 months depending on

the variety. In major producing states of India, sowing takes place in the month of July and harvesting

commences from December to February. March-April months are peak arrival period in turmeric.

Global scenario

India is considered as the largest producer, consumer and exporter of turmeric in the globe. Other major

producers are China, Myanmar, Nigeria, Bangladesh, Pakistan, Srilanka, Taiwan, Burma and Indonesia,

etc., Global production is estimated around 11 -11.5 lakh tonnes. India contributes about 78per cent of

the world production and 60per cent to the total trade. The increasing demand for natural products as

food additives makes turmeric an ideal produce as a food colorant. Additionally, anti-cancer and anti-

viral activities of turmeric may also increase its demand from pharma industry.

Source: Spice Board, GOI

From the above graph, it is seen that major share is taken by India. It accounts to 78per cent of the total

world production, followed by China (8 per cent), Myanmar (4per cent) and Nigeria and Bangladesh

together accounting to 6per cent.

Exports

India is a dominant player in the global market as far as turmeric export is concerned. Other major

exporters are Thailand, other Southeast Asian countries, pacific islands, Central & Latin American

countries and Taiwan. Turmeric is shipped in the form of dry turmeric, fresh turmeric, turmeric powder,

curcuminoids, dehydrated turmeric powder, oils and oleoresins. Exports of turmeric, during the period

from April to October 2007, from India pegged at 30,500 Mt, which is higher than last year’s figure of

29,200 Mt during the same period last year. Total exports from April 2006- February 2007 accounted for

51,000 tonnes against 42,000 tonnes in the same period a year ago. Major portions of the exports from

India are wrapped up by EU countries. In total spices exports from India turmeric accounted to 5 per

cent.

Turmeric exports from India during 2001-02 to 2006-07

30000

35000

40000

45000

50000

55000

2002-01 2003-02 2003-04 2004-05 2005-06 2006-07

80

90

100

110

120

130

140

150

160

170

Qty(MT) value(Cr)

Source: Spices Board, Ministry of Agriculture, Govt. of India.

Export demand is continuously rising since 2002-03 on account of increased non-food and food use in

some countries.

World trade in Turmeric

United Arab Emirates (UAE) is the major importer of turmeric from India accounting for 18per cent of

the total exports followed by United States of America (USA) with 8per cent. The other leading

importers are Bangladesh, Japan, Srilanka, UK, Malaysia, South Africa, Netherland and Saudi Arabia. All

these countries together account for 75per cent of the world trade, and Asian countries supplies to the

entire world. Remaining 25per cent is met by Europe and North America, Central and Latin American

countries. United States imports 97per cent of its turmeric requirement from India and remaining

portion from the Islands of the Pacific and Thailand.

According to Spice Board of India, major share is taken by U.A.E accounting for 18per cent, followed

by U.S.A (11per cent), Japan (9per cent), Srilanka, UK, Malaysia together accounting for 17per cent.

From Indi’s total turmeric exports, 65 per cent is taken by these countries.

Indian scenario

India has the lion share in production, consumption and export of turmeric in the world. It accounts for

78 per cent of the world output and 60 per cent of world exports. Indian turmeric is considered the best

in the world market because of its high curcumin content. In India, it is cultivated in the states of

Andhra Pradesh, Maharashtra, Orissa, Tamil Nadu, West Bengal, Karnataka and Kerala.

Source: Spices Board, Ministry of Agriculture, Govt. of India.

India has 1.81 Lakh hectares under turmeric cultivation with a total production of 8.9 lakh tonnes during

20007-08. In India, increasing trend in production witnessed in last 2-3 years due to increase in acreage.

Farmers have shifted from Chilli and Sugarcane cultivation to turmeric in addition to that in time

monsoon accompanied by high productivity. In India, average yield of turmeric during 2006-07 is 4952

Kgs/ha.

Source: Spices Board, Ministry of Agriculture, Govt. of India

In India, Andhra Pradesh followed by Tamil Nadu, Orissa, West Bengal and Assam takes major share in

turmeric cultivation. During 2005-06, Andhra Pradesh topped in both area and production with 0.7 lakh

hectares and 5.19 Lakh tonnes respectively.

Andhra Pradesh is called as turmeric bowl of India as it has highest share of 40per cent in total India’s

turmeric area followed by Tamil Nadu, Orissa, Assam and West Bengal each accounting for 15per cent,

14per cent, 7per cent and 7per cent, respectively. India had produced 8.51 lakh tonnes of turmeric in

2005-06. With the highest area, Andhra Pradesh tops the list of major producing states in India. It

accounts for 58per cent to total production. Other producing states are Tamil Nadu (17per cent) and

Orissa (8per cent).

Major turmeric producing states (Area & Production) in India

States Acerage(Lakh Ha)

Production(Lakh Tonnes)

2003-04 2004-05 2005-06 2003-04 2004-05 2005-06 Andhra Pradesh

0.58 0.61 0.70

3.21 4.18 5.19

Orissa 0.23 0.23 0.24 0.56 0.56 0.57 Tamil Nadu 0.16 0.21 0.26 0.67 1.18 1.43 West Bengal

0.12 0.12 0.116

0.24 0.24 0.25

Assam 0.12 0.11 0.118 0.08 0.08 0.08 Others 0.35 0.19 0.28 0.87 0.91 0.99 Total 1.50 1.58 1.72 5.64 7.18 8.51 Source: Ministry of Agriculture., Government of India.

In case of production major share is taken by, Andhra Pradesh accounted to 60 per cent of total

turmeric production in India, followed by Tamil Nadu (17 per cent) and Orissa (7 per cent).

Source: Spice Board, Ministry of Agriculture, Govt of India

Annually, India consumes around 7.9 lakh tonnes of turmeric and rest is exported. During 2007-08,

exports from April to October accounted for 30,200 tonnes. Generally, in turmeric surplus is less

because of higher domestic consumption, nearly 90per cent of the total production, but from last two

years, ample stocks in warehouses due to higher supply and steady demand from indigenous

consumption and exports resulted in carry over stocks of around one lakh tonnes from previous crop.

Price Analysis: Like other agro commodities, Turmeric also follows seasonality pattern. Prices will

touch its peak levels during lean season and lowest level in peak arrival period. Prices usually peak

during Diwali time that is during September to October on the back of huge domestic demand. In

turmeric spot and futures prices maintains a positive correlation of nearly 75per cent.

Arrivals: Arrivals to the physical market starts from the month of February onwards and continue till

end of the May in major producing areas. Huge arrivals can be seen in the months of March and April

and it slowly decline their onwards, lean period begins from August onwards. At present arrivals hitting

the market in limited quantity due to presence of high moisture content on recent rainfall coupled with

unwillingness of farmers to sell-off the stock in the market in anticipation of further rise in prices in

near term.

Source: Nizamabad APMC

Prices: From below graph we can infer that in Nizamabad spot market, turmeric price starts downward

movement from February onwards with commencement of fresh arrivals to the market and steep fall in

the prices can be seen from April onwards on the back of peak arrival season and surplus stocks in the

market may pressurize the prices.

From August months onwards prices starts moving upwards due to fresh export and domestic

demand. Peak price level will be witnessed during September and October months. In the months

of December and January prices touches their lowest levels due to offload of old stock in the

market in the wake of new crop arrival in February month. We can observe good export demand

throughout the year expect July and August period as this period witness heavy rainfall across

coastal region, which would hamper shipment.

Source: Nizamabad APMC

Out Look:

Since the inception of the May contract on NCDEX platform prices were on an uptrend and tested a

historical high at Rs. 3554 levels in the month of March first week., witnessing an over brought

condition in the market . Hence, we expect a good correction is due on this unprecedented rally. We

expect the price may trade in the broad range of Rs. 3100 levels on the down side and breach of Rs.3100

may see prices to test Rs. 2900-2950 levels.. On the contrary the major resistance levels can be seen at

Rs.3700. However, if market breaches and sustains above Rs. 3700 might see an extended rally towards

Rs. 4000 levels. Currently May and June month contracts prices trading at Rs 3470 and Rs. 3530 levels

respectively. Where in spot price quoting at Rs. 3100 levels per quintal.

Following fundamental factors supports prices to take a major correction:

Despite decline in production by 15-20per cent from newly harvested crop, prices may pressurize

in near term due to arrival pressure in the market

Improvement in arrivals from new crop in the month of March may suppress the prices

Arrivals hitting physical market at present in Nizamabad are around 15000-2000 bags per day

may further increase in near term to 25,000 bags per day.

On domestic exchanges prices in all the contracts displaying a pretty higher prices, which took

place in last quarter.

May month contract turmeric prices are trading fairly at higher level at Rs. 3572 levels compared

to same period during last year’s level of Rs.1900-2000 levels per quintal

Market is in over brought conditions and correction is not over ruled on this rally in near term.

Profit booking on recent rally may pressurize the prices.

Where as spot markets trading at Rs.3100 levels per quintal. Basis between spot and futures is -

300-400 points.

Current year production anticipated to be decline to 7-7.5 lakh tonnes against 8.9 lakh tonnes

of last year

Carry forward stocks are expected around 1 lakh tonnes from last year.

However, the year 2008-09 is anticipated to be a bullish year for turmeric because of lower out

put estimates and rising strong demand in the market from diversified sectors.

Price Outlook:

For short to medium term prices are likely to come down by another Rs. 250- 300 per quintal in 1 -2 months, due to long liquidation supported by increase in arrivals in the market. However, the long term sentiment is strong and price may resume its bullish trend with the easing of arrivals and expectation of fresh export demand. The prices are likely to touch Rs. 3600- 3650 levels by September-October 2008. To unsubscribe please mail us at commodity@karvy.com Disclaimer The report contains the opinions of the author, which are not to be construed as investment advices. The author, directors and other employees of Karvy and its affiliates cannot be held responsible for the accuracy of the information presented herein or for the results of the positions taken based on the opinions expressed above. The above mentioned opinions are based on the information which is believed to be accurate and no assurance can be given for the accuracy of these information. There is risk of loss in trading in derivatives. The author, directors and other employees of Karvy and its affiliates cannot be held responsible for any losses in trading. Commodity derivatives trading involve substantial risk. The valuation of underlying may fluctuate, and as a result, clients may lose entire of their original investment. In no event should the content of this research report be construed as an express or an implied promise, guarantee or implication by or from Karvy Comtrade that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided on this report is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. We do not offer any sort of portfolio advisory, portfolio management or investment advisory services. The reports are only for information purpose and not to be construed as investment advices. For Detailed disclaimer please go to following URL's: http://www.karvycomtrade.com/disclaimer.asp http://www.karvycomtrade.com/riskDisclaimer.asp