Cardamom's aroma to fade away as prices may fall 25%

Thursday, Jul 9

NEW DELHI/MUMBAI – Cardamom has been a favourite of traders up until now as it has been fetching higher prices ever since the heavy rainfall and flood in Kerala two years ago. But now with likely higher production and the COVID-19 pandemic hitting demand, cardamom growers are starting to get worried as prices are expected to fall by 25-30%.

The floods in August 2018 swept away a large chunk of cardamom plantations in Kerala, driving average prices up to a record high of 4,733 rupees per kg at the spot auctions that year. A year later, prices skyrocketed to a high of 7,000 rupees. Since then, prices have remained in a range of 1,500-3,800 rupees, against the normal range of 900-1,100 rupees.

Currently, the average price of small cardamom at the auctions is 1,500-1,600 rupees per kg.

"A higher estimated production for 2020-21 (Jul-Jun) and tepid demand due to the virulent pandemic is likely to lead to a fall in prices to around 1,000 rupees during the peak picking season," said Nishanth Varghese, manager-operations at Kochi-based Kancor Ingredients Ltd.

Traders see cardamom production in the next season at 22,000-23,000 tn, against 16,000 tn in 2019-20. However, the Spices Board of India has pegged the country's 2019-20 output at a much lower 11,230 tn.

"Major consuming centres like Delhi, Kanpur, Mumbai and Tamil Nadu are badly affected by COVID-19 so consumer demand is less. The overall consumption has also fallen because of low spending capacity, not everyone can afford it nor is it an essential item," said P.C. Punnose, chief executive officer of The Cardamom Planters Marketing Cooperative Society.

During the lockdown period, 70-75% of traders lost considerable amount of money. They had stocked up in anticipation of a further rise in prices but the pandemic has unfortunately prolonged, said Punnose.

On the trade front, buyers are in a wait-and-watch mode before making bulk purchases, fearing lower returns.

"...market players do not want to invest because the level of uncertainty following the COVID-19 outbreak is very high... prices are expected to be around 1,200 rupees in coming months," said Hemen Ruparel of Mumbai-based exporter Samex India Pvt Ltd.

Though the overall outlook for the commodity is seen bearish, likely fall in supply during the peak season and any adverse weather in the coming months would stabilise the prices, traders said.

Even though the crop condition looks good so far, fear of excess and continuous rains over the coming months may have a negative impact on the crop which is near its picking period, and this may lead to downgrade of qualitative and quantitative estimates, said Varghese.

Currently, the first round of picking has started in Kerala and new crop of cardamom is arriving in small quantities at auctions. The quantity will increase in August and the second round of picking will start in September.

"Rains have just started two days ago. It's late by over a month. Cardamom needs rain... it's the main important factor. Dams, rivers are not getting filled. We genuinely have to wait till August to be sure. Crop is expected to be good but again if heavy rains occur, there will be damage," said Anjo T. Jose, executive director of Mas Enterprises.

After markets reopened and auctions resumed, stockists started offloading old stocks and are holding only 15-20% of carryover stocks from the previous season.

Although traders have made space for the new season's crop, they will also look for opportunities to make the most of a good turn in prices, if that happens.

"If prices fall more and there is some unexpected weather adversity, then we will hold stocks and wait for prices to rise," said Joseph Kattakkayam, a grower based in south India.

Being a labour-intensive crop, movement of migrant labourers to their hometowns has become another cause of headache for planters. Labourers from Tamil Nadu might also not come due to inter-state travel restrictions. This may lead to restricted arrivals during Aug-Sep, the peak harvest season, traders said.

On the flip side, this could be good news for consumers, especially for lower income households, as the aromatic spice may finally become affordable this festival season. 

By Preeti Bhagat and Kavita Desai
Edited by Maheswaran Parameswaran
http://www.cogencis.com

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