Jeera prices correct sharply ahead of sowing on liquidation of position

The government's production estimates though are much higher on jeera than what traders and market experts said

Jeera prices, which had touched record highs of around Rs 65,900 per quintal around September on the National Commodity and Derivatives Exchange, have crashed to their six-month low of around Rs 39,630 earlier this month before stabilising at around Rs 45,000 in the past few days.

This is due to the liquidation of positions by traders and easing speculative activities.

The slump in prices, just weeks ahead of the new crop sowing, can affect farmer sentiment.

Sowing has been delayed this year due to higher than normal temperatures in major growing regions and also the escalated cost of major inputs.

In the Unjha spot markets too, prices had reached their record highs during the same time, mirroring the futures, but were at a discount to them (see chart).

The sowing of jeera starts during October 15-20 and the harvest begins in March. But this year to date, it started in less than 60 per cent of the sowing area in the Kutch region of Gujarat, which is one of the main growing zones, traders said.

Some farmers said if temperatures remained unfavourable for a few weeks more, there might also be a shift towards saunf (fennel seeds), which is easier to grow.

Jeera production across India, according to trade sources, in the just concluded season was 250,000-270,000 tonnes as against a normal of 310,000-450,000 tonnes a few years ago.

The government’s production estimates, though, are much higher than what traders and market experts say.

On sowing, farmers said so far high temperatures were preventing them from going for it on a large scale because heat disturbs germination.

“Last year, several farmers planted the crop early but had to suffer losses because of high temperatures. Therefore, this year, farmers are waiting for the right climatic condition,” said Jeetendra Ahir, a jeera farmer from the Kutch region.

He said normally the temperature during this time of the year in Kutch was around 33 degrees Celsius but this year it hadn’t come down from 37-38 degree Celsius.

On top of that the initial sowing cost has gone up due to the high price of jeera seeds, Ahir said.

“Earlier, good-quality jeera seeds were available at around Rs 500 a kg for sowing, but this year they are not available even at Rs 1,000 per kg,” he said. In one acre, one needs around 5 kg of jeera seeds to sow the crop.

Other than seeds, farmers need a bag of di-ammonium phosphate to sprinkle on the field initially. That costs around Rs 1,350 per bag (one bag is of 50 kg).

“This year the sowing cost per acre has moved up to Rs 12,000-13,000 as against Rs 6,000-7,000 required till last year,” Ahir said.

He said in contrast, the cost of sowing saunf (fennel seeds) had remained at Rs 5,000-5,500 per acre and there was no temperature problem there.

Tarun Satsangi, specialist, global commodity research and trade, SilkRoute.ag, said it was an axiom in financial markets that low or high prices often served as an antidote, prompting a reduction in supply in the case of low prices and destruction in demand if prices were high.

“The exorbitant increase in jeera prices was unsustainable as it was guided by fervent speculative activities by traders. This speculative zeal ultimately led to a massive liquidation of positions, as traders sought to capitalise on this once-in-a-decade opportunity, all of which culminated in a substantial correction in cumin seed (jeera) prices,” Satsangi said.

Silk Route is a global agritrade company based in Dubai.