spices complex - NCDEX

SPICES COMPLEX

SPICES
Spices form an important ingredient of Indian cuisine. The delightful combination of the variety of spices lends a distinctive
spices futures on its platform for managing price risk and providing an alternative investment avenue. Chilli, Coriander,
Jeera, Pepper and Turmeric constitute NCDEX’s spice complex for derivatives trading. The performance of these contracts
India is the leading producer, consumer and exporter of spices in the world. From time immemorial India has been known
as the Land of Spices. The Chinese, Arabs and The Europeans came to the Indian shores lured by the spices grown here. The
world consumption of spices is growing steadily year on year and trading in Spices Futures has also grown from strength to
You can trade in Spices futures by either becoming a member of NCDEX or a client of one of the members
of the Exchange.
PEPPE
R
APRIL 2004
TURMERIC
JULY 2004
JEERA
FEBRURY
2005
CHILLI
MARCH
2005
CORIANDER
AUGUST
2008
F
• Global and Domestic Production /Demand
• Import/Export Data
• Total Deposited Stock & FED wise stock position
• Climatic conditions
• Daily Arrivals and trades in the cash market
• International Price parity
• Year ending stocks and stocks-to-consumption ratio
• Prices received by farmers for other competing crops & Sowing progress
• Cost of Carry components (Warehousing, Assaying, Demat/Remat charges)
• Spot Prices
• Daily Margins
D
• Spices are used in the dry, fresh and powder forms and are also used to make oleoresin.
• All spices are used as a
agent for culinary purposes and form an important ingredient
of curry powders and Indian recipes.
• Spice powders are used as colouring agent for processed foods
• Spices are being extensively used in medical, Pharmaceutical, Cosmetics & Food Processing
Industries.
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EXPORTS
FROM I NDIA
(APR-JUN
2011) TONNES
CHILLI - 40,500
TURMERIC - 21, 775
CORIANDER - 7, 500
CUMIN - 5,750
PEPPER - 5,750
SPICE UP YOUR INVESTMENT PORTFOLIO
50
40
30
20
10
0
Top Performing Spices
Returns in Jan-July 2011 (%): Near Month Futures
Best
Performing
Long
Coriander
Best
Performing
Short
Turmeric
SPICES FUTURES AS A TOOL TO MANAGE PRICE RISK
24
21
18
15
12
9
6
3
0
PRICE VOLATILITY
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
DHANIYA PEPPER TURMERIC JEERA CHILLI
Source: NCDEX (Monthly volatility calculated on the basis of spot prices of base centre
KNOWLEDGE EDGE
Plantation- Harvest Calendar: India
Spices Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
RED CHILLI
CORIANDER
JEERA
PEPPER
TURMERIC
Harvest Planting Flowering
The Plantation - Harvest Season may changed due to change in climatic conditions.
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SPICES @ NCDEX
Coriander (Dhaniya) – (Market size – 1100 Crores, HS Code 090920)
Coriander, an annual rabi crop of the country is sown around
About 80% of the production in India comes from Rajasthan.
The other major producing states are Madhya Pradesh, Andhra
Pradesh and Orissa. The Total Domestic production of the crop
is around 2.5-3.00 lakh tonnes. Indonesia, Sri lanka,UAE, Saudi
Arabia, USA, UK, Germany and the Netherlands are the major
importers whereas India, Turkey, Egypt, Romania, Morocco, Iran
and China are chief exporters. Popular grades of the rounded
seed spice on the basis of colour are Badami, Eagle, Scooter
and Parrot. Major trading centres of this
spice include Kota, Ramganj, Baran and Jaipur in Rajasthan, Guna in
Madhya Pradesh and Virudnagar in Tamilnadu. India is the largest producer, consumer and exporter of coriander.
Chilli (Mirchi) – (Market size – 6954 Crores, HS Code 09042010)
chilli
and
Cumin seed (Jeera) – (Market Size – 2050 Crores, HS Code 090930)
Gujarat is the largest jeera producing state in the country,
followed by Rajasthan. These two states alone contribute
approximately 90% of production in the country. India leads the
world production with around 2.0 lakh MT of Jeera produced
annually and harvesting session of the crop is from February
- April. Most of the Jeera produced is consumed within the
country. Although Syria, Turkey and Iran have a much lower
level of production as compared to India, but these countries
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prices as a bulk of their production is used for export purpose. Indian cumin is exported to many countries in its natural
as well as powdered form, besides as an essential oil. The export of cumin seeds from India has increased manifold in the
last five years. Jeera or cumin seed has significant demand as a spice all around the globe especially in the places where
spicy food is preferred.
Turmeric (Haldi) – (Market Size – 5758 Crores, HS Code 091030)
Indian turmeric is considered to be the best in the world due
to presence of high curcumin content. There are wide uses
of this golden spice. Apart from its domestic culinary use, it
processed foods. Turmeric is also an important ingredient in
cosmetics as well as in the pharmaceutical industry. It is mainly
cultivated in Andhra Pradesh, Tamil Nadu, Maharashtra, Orissa
and West Bengal, with production ranging from 5.5-8.0 lakh
tonnes and harvesting session is from February to April. The
spice is generally available as “Fingers” and “Bulbs”. Some of
the well known varieties of turmeric are ‘Salem’ and ‘Erode
turmeric’ (from Tamil Nadu), ‘Rajapore’ and ‘Desi Cuddapah
turmeric’ (from Maharashtra) and ‘Nizamabad turmeric’ ,‘Duggirala turmeric’, ‘Cuddapah turmeric’ and ‘Warangal turmeric’
(from Andhra Pradesh).
India is the largest producer, consumer and exporter of turmeric across the globe. The other major producers are China,
Myanmar, Nigeria, Bangladesh, Pakistan, Sri Lanka, Taiwan, Burma and Indonesia.
Pepper (Kalimirch) - (Market Size 803 Crores, HS Code 09041130)
Black pepper is often referred to as black gold among spices.
Pepper berries are usually dried and used as spice and
seasoning. Black pepper is used directly as spice and also for
the preparation of oleoresin and oil. Pepper grades in trade
grades are Malabar and Tellicherry. In addition to these two
Indian varieties, the major varieties traded in the world include
Lampung, Brazilian, Ceylon, Sarawak and Vietnam.
Vietnam with an annual production of almost double that of
India, has now become one of the major suppliers of pepper
in the international markets. However, Indian pepper fetches a
premium price in major markets because of its preference and
intrinsic qualities. India, Brazil, China, Indonesia, Malaysia, Sri Lanka, Thailand and Vietnam are major players in pepper
production and exports. June-July is the harvesting period in Sarawak (Malaysia), August- September in Brazil, July-
September in Lampung (Indonesia) and January-February in India. World Pepper production varies from 2.7 lakh-3.6
lakh MT per annum whereas Indian production varies from 45,000 to 50,000 MT. Kerala is the leading state producing
black pepper in India.
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VALUE CHAIN: ALL PARTICIPANTS IN THE VALUE CHAIN FACE THE PRICE RISK
Farmer
Commission Agent or
Kachcha Adatia
Trader or
Pakka adatia
Processor/
Exporter
Consumer
Retailer
Wholesaler
SPICES FUTURES CONTRACTS SPECIFICATIONS
Parameter
CHILLI
CORIANDER
JEERA PEPPER TURMERIC
Ticker Symbol CHLL334GTR DHANIYA JEERAUNJHA PPRMLGKOC TMCFGRNZM
Unit of Trading 5 MT
10 MT
3 MT 1 MT 5 MT
Delivery Unit 5 MT
10 MT
3 MT 1 MT 5 MT
Quotation Base Value `/quintal* `/quintal* `/quintal* `/quintal* `/quintal*
Tick Size Re. 2
Re. 1
Re. 1 Re. 1 Re. 2
Maximum Order Size 250 MT
500 MT
150 MT 50 MT 250 MT
Basis Centre Guntur
Kota
Unjha Kochi Nizamabad
Additional Delivery Centres
Warangal
Ramganj Mandi,
Jaipur, Guna,
Baran
Delhi, Jaipur,
Jodhpur
Calicut, Trissur
Erode, Sangli,
Warangal,
Duggirala,
Cuddapah
Grade
Member’s
Position
Limit (MT)
Client’s
Position
Limit (MT)
Delivery Logic
Compulsory delivery of contracts implies that all open position at the expiry of contract need to be settled
www.ncdex.com.
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Badami
Machine Clean
Jeera
All Contracts 12500
7500
3000
Near Month
All Contracts
Near Month
LCA 334
(2500)
4000
(800)
Compulsory
Delivery
(1500)
2500
(500)
Compulsory
Delivery
(600)
1000
(200)
Compulsory
Delivery
Malabar
Garbled- 1
4500
(900)
1500
(300)
Compulsory
Delivery (Early
Delivery)
Unpolished
Finger
20000
(4000)
5000
(1000)
Compulsory
Delivery
(* : quintal=100 Kgs)

MAJOR AREAS OF SPICES PRODUCTION
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TRADING STRATEGIES
Hedging
Sugandh Exporters has an export commitment
of 30 M T of Jeera for delivery in December
2011 contracted at `15,500 per quintal.
The exporter faces the risk of jeera prices
going up. As soon as he enters into export
contract, he buys 10 contracts of December
2011 expiry Jeera futures at existing price of
15,000 per quintal. In the month of December,
price of jeera in spot market (as well as in
futures on expiry) becomes `16000 per quintal.
He incurs a loss of `500 per quintal in
meeting the export obligation but gains
`1000 per quintal in futures market. Thus, he
manages to hedge from adverse price risk by
taking corresponding positions in futures
market.
Cash & Carry Arbitrage
Tikharam has no direct exposure to dhaniya
trade; however, he has interest in commodity
investment. He finds out that dhaniya december
2011 futures are trading at `6000 per quintal
and current spot price is `5200 per quintal.
He noticed that after accounting for cost of
carry (assaying, storage, interest etc), his cost to
deliver in december is around `5900 per quintal.
He procures 10 MT from local mandi today
and deposit it in NCDEX accredited warehouse.
At the same time, he sells 1 dhaniya futures
contract of december expiry on NCDEX. At
expiry, Tikharam delivers dhaniya and realises
the profit of `10,000.
Swadumal is a keen observer of futures price of
pepper traded at NCDEX. From his experience
over the years, he knows that normally the
prices of January expiry contract exceeds that
of December contract by around `500.This
difference is called 'spread' in trade terminology.
Due to some fluctuation in market, this
spread shrinks to `300. Swadumal believes that
eventually the spread will resume normalcy
and increase to around `500. He, therefore,
buys 1 contracts of january Pepper and shorts 1
contracts of December pepper. In a few days,
spread widens to `450. He squares off his position
in both the contract and realises the profit
of ` 1,500.
Speculation
Ms. Mirchi has through understanding of the
fundamentals of chilli trade and keeps a
continuous track of domestic and internationall
developments that affect the price of chilli.
In the Present scenario, she is convinced that
the price of chilli is likely to increase in coming
months. She takes a long position by buying 5
futures contracts of NCDEX chilli for far month
at `9,000 per quintal. In few days, the price
increases to `10,000 per quintal and she
squares off her position and locks in the profits.
Contact our Business Team (Spices) for any query/information:
SRIKANT AMBATI (HYDERABAD) + 919951922000 ANUP RAJ (DELHI) +919958110086
JITENDRA SINGH (JAIPUR) +919983325699 VIKRAM SINGH (KOLKATA) +919051454777
SREEKANTH CHETTIYAR (KOCHIN) +919946761411 SANDEEP DUBEY (HYDERABAD) +919949152475
ANIL JAISWAL (AHMEDABAD) +919898066934 BHARAT JAKATI (MUMBAI) +919833255348
DEEPAK SAYANA (HYDERABAD) +919848220310 TARUN KATOCH (INDORE) +919754417054
GAURAV MIDDHA (DELHI) +919711159060 T. UMESH (JAIPUR) +918239101000
AMIT DARAK (MUMBAI) +919819179128
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