Bulls are ready to run over the agro basket

Tags: Commodities

Investors can hope for big returns on commodities like turmeric, jeera, cotton and cardamom

Bulls are ready to run over the agro basket
The year 2012 was very exciting for the agro-commodities market. High volatility and rising trading interests resulted in improved volumes in the futures market. There were many commodities, which gave significant returns — especially during the initial eight-nine months before profit booking set in at higher levels. Volumes shot up on the exchanges and high liquidity was observed on counters that were not very liquid so far. Assisted by strong fundamental factors, we saw commodities like pepper, jeera, chana, kapas, cocud giving 50 per cent to 100 per cent returns in the first nine months itself before corrections occurred. Turmeric prices nearly doubled from their lows. Even commodities like barley, maize, coriander (dhaniya), castorseed, cardamom that were seeing low liquidity just a year back showed huge appreciations not just in prices but also in volumes.

In 2013 too, the market is looking highly bullish for most agro-commodities. A drop in kharif and rabi crop expectations due to reports of adverse monsoon from most parts of India during the sowing season and rising export and domestic demand are likely to keep sentiments firm for pulses, spices, kapas and the oil complex. Investors can expect significant returns especially in commodities like jeera, turmeric, cardamom and cotton.

Jeera: Low sowing reports in the jeera-growing states of Gujarat and Rajasthan, a drop in production in global markets and political tensions in Turkey and Syria are expected to create highly bullish sentiments for jeera in the domestic market. Imports from the US, EU and the West Asia are going to shift mainly to India and any fall in local production could perk up prices further. The current rates of Rs 15,400 per quintal in the futures market could pretty well break the Rs 20,000 mark in the first nine months of the New Year if these factors materialise.

Turmeric: Higher production and high stock levels had created a moderate cooling impact on turmeric prices over the past four months. There have been anticipations that the rates have fallen to very low levels. Even though a further fall in prices by Rs 1,000 to Rs 1,500 is possible in the short term from the present level of Rs 6,100 per quintal in the futures market, traders expect domestic and, more importantly, export demand to rise as new crop arrivals start early next year onwards. On the downside, the commodity has strong support at Rs 4,500-Rs 4,800, while on the upside, prices may even cross the Rs 8,000 mark over the next six to eight months. The present level is very low and a rise in dollar against the rupee could help improve market sentiments further.

Cardamom: Adverse weather reports in the growing areas in Kerala, expectations of lower production, low stock levels and the present low rates – all these factors are likely to keep sentiments highly bullish for cardamom over the next six months. Reports indicate a drop in production to 14,000 tonnes compared with 21,000 tonnes last year. But, more importantly, there has been a massive correction in the rates by over 40 per cent over the past four months. Traders feel the current rates are very low and demand is likely to pick up over the next few months leading to firmness in rates. The present rate of Rs 900 a kg is likely to touch Rs 1,500-Rs 1,600 a kg mark by June, 2013 in the futures market.

Cotton: A drop in yield of the crop and an expected 20-30 per cent fall in production in Gujarat due to increased demand from the millers and the government’s move to hike registration limits for cotton exports to 30,000 bales could support the commodity on the export front as export demand from China is expected to pick up fast. The current rate of Rs 16,500 per bale (of 170 kg) is likely to break the Rs 20,000 barrier by the middle of 2013 as low stocks amidst an expected drop in production and rising export demand are likely to perk up market sentiments for the commodity. zz

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