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Last Updated : Jul 09, 2020 12:12 PM IST | Source: Moneycontrol.com

Turmeric futures to remain high amid rising demand in domestic market

Technically, one can initiate a long position in the NCDEX turmeric futures for a target of Rs 6,450 per quintal.

Moneycontrol Contributor @moneycontrolcom

Sumeet Bagadia

Turmeric, better known as Haldi, is a Kharif spice sown and grown during the months of June to August, mostly in Telangana, Maharashtra and Tamil Nadu. The new crop is harvested from February to April.

The sowing of turmeric depends on the monsoon and weather conditions during the said period. Heavy rainfall with good amounts of water content in the soil improves the yield.

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Price also plays a critical role in determining how the sowing. Higher prices are generally forecasted to increase sowing of turmeric, while lower prices can lead to crop switching to soybean, cotton and maize.

Northern parts of Karnataka and southern areas of Andhra Pradesh also grow turmeric. Several variants of turmeric are grown in India, mainly finger, bulb and Rajapuri.

Prices differ with variants, based on quality and moisture content. The variant that is listed on the NCDEX exchange is the Finger Turmeric, which is light yellow in colour. India is among the top producers and exporters of turmeric in the international market. Other global producers include South Asian states, Central and Latin America and Taiwan.

NCDEX turmeric future price traded mixed to bullish in June and closed higher by 8.87 percent at Rs 5,740 per quintal on June 30 compared to Rs 5,272 per quintal as on May 29.

Increased demand with the start of monsoon season and lower arrivals in the Nizamabad market led to an uptrend in turmeric future prices.

Farmers, too, have also been holding back their stocks due to lockdown and rise in COVID-19 cases in Tamil Nadu and Telangana. This has created a supply tightness in the domestic market and has also supported prices in the past couple of weeks.

For the month ahead, we are estimating NCDEX turmeric futures to trade higher, as seasonal factors for the last five years indicate further buying in the coming months, which is the sowing period.

Moreover, positive monsoon reports by IMD has improved the sentiments for higher sowing in Telangana, Tamil Nadu and Maharashtra. This is expected to bring lower supplies in the coming months as farmers are expected to be engaged in the same. In addition, locust attacks continue to trouble northern regions that can create worries in the southern states as locusts usually breed in the monsoon season.

Current lower prices of turmeric can lead to crop switching to soybean, maize and cotton. However, major upside can be capped as turmeric exports continue to remain low on a monthly basis. As per the Department of Commerce, turmeric exports for the period April to February 2020 were reported at 1,24,847.37 tonnes, compared to 1,25,755.8 tonnes last year.

Overall, we are bullish with a sowing correction trend in NCDEX turmeric futures for the month ahead.

Technically, one can initiate a long position in the NCDEX turmeric futures for the target of Rs 6,450 per quintal. However, the bullish view will be negated if NCDEX turmeric futures closes below the support of Rs 5,540.

(The author is Executive Director at Choice Broking.)

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Jul 9, 2020 12:12 pm
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