Professional Documents
Culture Documents
SR. NO.
PARTICULARS
Acknowledgement
Executive summary
Commodity derivatives
Commodity trading
Indian spices
pepper
Cumin seed
10
chilli
11
conclusion
12
Reference
PAGE No.
In this report we would try and look what are commodity markets, how they function
and all about spices and their future estimation.
For this the report is divided in seven sections
In the first & second section, we would see what is commodity & why is there need
for commodities markets, what are the different factors that affect the commodity
prices, we would see what are commodities markets and what are different types of
commodities traded on exchanges.
In the third section we will look at the different commodity exchanges in India and
the commodities traded there.
In the fourth section we would look at the functioning of commodities market, for
this we will take example of one of India's primary commodity exchange National
Multi Commodity Exchange (NMCE), in this section we would see the membership
requirements, we would see how the commodities are traded in commodity
exchanges, how the delivery of commodities is done and how the issues related to
quality of assets and warehousing of commodity are carried out. We would also see
the price trends of various commodities traded on NMCE.
In the fifth section we would see the regulatory frame work for commodities market.
In the sixth section we would see the history about Indian spices, regulations of
spices board, state wise production of spices & export scenario of spices.
At last in the seventh section we would look the main 4 commodities that are traded
in India most and estimate the future scenario of these commodities.
For the former, commodity is a largely homogeneous product, traded solely on the
basis of price, whereas for the latter, it refers to wares offered for exchange.
In the original and simplified sense, commodities were things of value, of uniform
quality, that were produced in large quantities by many different producers; the
items from each different producer are considered equivalent. It is the contract and
this underlying standard that define the commodity, not any quality inherent in the
product. One can reasonably say that food commodities, for example, are defined by
the fact that they substitute for each other in recipes, and that one can use the food
without having to look at it too closely.
At present, all goods and products of agricultural (including plantation), mineral and
fossil origin are allowed for futures trading under the auspices of the commodity
exchanges recognized under the FCRA. The national commodity exchanges have
been recognized by the Central Government for organizing trading in all permissible
commodities.
Characteristics of commodity
In Marx's theory, a commodity has value, which represents a quantity of human
labor. The fact that it has value implies straightaway that people try to economise its
use. A commodity also has a use value, an exchange value and a price.
It has a use value because, by its intrinsic characteristics, it can satisfy some
human need or want, physical or ideal. By nature this is a social use value,
i.e. the object is useful not just to the producer but has a use for others
generally.
It has an exchange value, meaning that a commodity can be traded for other
commodities, and thus gives its owner the benefit of others' labor (the labor
done to produce the purchased commodity).
The process of economic liberalization in India began in 1991. As part of this process,
several capital market reforms were carried out by the capital market regulator
Securities and Exchange Board of India. One such measure was to allow trading in
equities-based derivatives on stock exchanges in 2000. This step proved to be a shot
in the arm of the capital market and volumes soared within three years. The success
of the capital market reforms motivated the government and the Forward Market
Commission (the commodities market regulator) to kick off similar reforms in the
commodities market. Thus almost all the commodities were allowed to be traded in
the futures market from April 2003. To make trading in commodity futures more
transparent and successful, multi-commodity exchanges at national level were also
conceived and these next generation exchanges were allowed to start futures trading
in commodities on-line.
Commodities exchanges have seen a surge in commodity futures volumes in the last
few years. This rise in volumes has been led by bullion (gold and silver) trading.
Today a whole lot of commodities are available for trading in futures and the list is
getting bigger by the day. No wonder then that the commodity futures market is
being viewed as a significant business segment by many businessmen, investors,
institutions, brokers, banks etc.
Of course there are still millions of Indians who are not aware that commodities
other than gold and silver can also be traded in on commodity exchanges like equity.
Fewer still know that commodities can be traded on-line!
In this part of project I tried to cover every aspect of commodity trading and have
been written in a language that is simple and lucid.
I am certain that this will help me a long way in generating awareness about
commodity trading for me. The various money-making trading strategies for the
commodities market discussed here it will also be of immense help to those billion
investors who are already trading in commodities.
1)
Most of the commodity exchanges of today were started in the late 19th century and
the early 20th century. To understand how the commodities market works in India,
we need to understand how it works outside India. That is because the everincreasing pressure on the other global markets to integrate with each other and
with the US markets, and the liberalization process that started in our country in the
early 90s necessitate the study of global markets. Let us thus take a look at how it
all began.
It all started in an American city called Chicago. In the 1840s, Chicago had become a
commercial centre with railroad and telegraph lines connecting it with the East.
Around the same time, the McCormick reaper was invented which eventually led to
higher wheat production. Farmers from the Midwest came to Chicago to sell their
wheat to dealers, who, in turn, shipped it all over the country.
The Midwest farmers brought their wheat to Chicago hoping to sell the same at a
good price. The city had few storage facilities and no established procedures either
for weighing grains or for grading the same. In short, the farmers were often at the
mercy of the dealers.
The year 1848 saw the opening of a central place where the farmers and dealers
could meet to deal in "spot" grain, i.e. to exchange cash for immediate delivery of
wheat.
The futures contract, as we know it today, evolved as the farmers (sellers) and the
dealers (buyers) began to commit to future exchanges of grain for cash. For
instance, a farmer would agree with a dealer on a price to deliver to the latter 5,000
bushels of wheat at the end of June. The bargain would suit both the parties. The
farmer would know how much he would be paid for his wheat while the dealer would
know his costs in advance. The two parties would even exchange a written contract
to this effect along with perhaps a small amount of money representing a
"guarantee.
Such contracts became common and were even used as collateral for bank loans.
They also began to change hands before the delivery date. If the dealer decided that
he did not want the wheat, he would sell the contract to someone who did. Or the
farmer who didn't want to deliver his wheat would pass his obligation to another
farmer. The price would go up and down, depending on what happened in the wheat
market. In the event of bad weather, the people who had contracted to sell wheat
would hold more valuable contracts because the supply would be lower; if the
harvest were bigger than expected; the seller's contract would become less valuable.
It wasn't long before people who had no intention of ever buying or selling wheat
began trading the contracts. They were speculators, hoping to buy low and sell high
or sell high and buy low.
This saw the birth of the first central exchange in 1848 in Chicago under the name
Chicago Board of Trade (CBOT). The emergence of the derivatives market as an
effective risk management tool in the 70s and the 80s resulted in the rapid creation
of new exchanges and the expansion of the old ones.
These old exchanges are located mainly in developed nations. However a few were
created in developing countries too. The Buenos Aires Grain Exchange in Argentina,
established in 1854, is one of the oldest in the world.
2)
India.
You will be surprised to hear that the first organized futures market in India was set
up way back in 1875 in the form of the Bombay Cotton Trade Association. However
the Bombay Cotton Exchange founded in 1893 was the first organized commodity
exchange in India.
The Gujarati Vyapari Mandali in 1900 carried futures trading in oilseeds: groundnut,
castor seed and cotton. The Chamber of Commerce at Hapur set up in 1913 was the
most notable futures exchanges for wheat. Futures trading in bullion began in 1920
in Bombay. In 1919 jute trading was conducted by the Calcutta Hessian Exchange.
But organized futures trading in raw jute began only in 1927 with the establishment
of the East Indian Jute Association.
Most of these exchanges traded in region-specific commodities and the lack
of a national level exchange that could offer multiple commodities at the
same platform was felt time and again. So about a couple of years back, at a
time
when
21
regional
exchanges
in
India
were
offering
various
commodities for trading the government came out with the national
commodity exchanges, similar to the BSE & NSE, to come up and let them deal in
commodity derivatives in an electronic trading environment. These exchanges are
expected to offer a nation-wide anonymous, order driven, screen based trading
system for trading. The Forward Markets Commission (FMC) will regulate these
exchanges.
Consequently four commodity exchanges have been approved to commence business
in this regard. They are:
1.
2.
3.
4.
3)
Globally commodities derivatives exchanges have existed for a long time. Table
below gives a list of commodities exchanges across the world. The CBOT and CME
are two of the oldest derivatives
Chicago Board of Trade was established in 1948 and has trading in agricultural produce, interests, Dow, metals
and US treasuries. Soya complex, wheat and corn prices across the world are referenced here. It has both
electronic as well as open cry. It trades both in futures as well as options. In 2005 it became a public traded
NYSE listed company.
Tokyo Comm
Tokyo Commodity Ex
exchange in the wor
platinum and rubber
Shanghai Fu
Shanghai Futures Ex
aluminium, fuel oil, r
Sydney Futu
London Inte
(LIFFE)
London Internationa
actively commodities
coffee prices are det
National Mul
National Multi-Comm
by commodity releva
Agricultural Co-opera
National Com
National Commodity
here. Other commod
Multi Commo
Dubai Merca
The
role
of
the
Forward
Markets
Commission
and
to
make
suitable
2. To review the role that forward trading has played in the Indian commodity
markets during the last 10 years.
3. To examine the extent to which forward trading has special role to play in
promoting exports.
4. To suggest amendments to the Forward Contracts Regulation) Act, in the light
of the recommendations, particularly with a view to effective enforcement of
the Act to check illegal forward trading when such trading is prohibited under
the Act.
5. To suggest measures to ensure that forward trading in the commodities in
which it is allowed to be operative remains constructive and helps in
maintaining prices within reasonable limits.
6. To assess the role that forward trading can play in marketing/ distribution
system in the commodities in which forward trading is possible, particularly in
commodities in which resumption of forward trading is generally demanded.
The committee submitted its report in September 1994. The recommendations of the
committee were as follows:
The
Forward
Markets
Commission
(FMC)
and
the
Forward
Contracts
Due to the
The FMC which regulates forward/ futures trading in the country should
continue to act a watch.dog and continue to monitor the activities and
operations
of
the
commodity
exchanges.
Amendments
to
the
rules,
1. Basmati rice
2. Cotton and kapas
3. Raw jute and jute goods
4. Groundnut, rapeseed/mustard seed, cottonseed, sesame seed, sunflower
seed, safflower seed, copra and soybean, and oils and oilcakes of all of them.
5. Rice bran oil
6. Castor oil and its oilcake
7. Linseed
8. Silver
9. Onions
The liberalised policy being followed by the government of India and the
gradual withdrawal of the procurement and distribution channel necessitated setting
in place a market mechanism to perform the economic functions of price discovery
and risk management.
The
national
agriculture
policy
announced
in
July
2000
and
the
Table: 3
Exchange
Gur
Sunflower oil
Cotton (Seed and oil)
Safflower (Seed, oil and oil
cake)
Groundnut (Nut and oil)
Castor oil, Castor seed
Sesamum (Oil and oilcake)
Rice bran, rice bran oil and
oilcake
Crude palm oil
Groundnut oil
Castor seed
Rapeseed/ Mustardseed oil
and cake
Gur
Turmeric
Cottonseed, Castorseed
Gur
Pepper Domestic-MG1
Gur, Rapeseed/ Mustardseed
Sugar Grade-M
Rapeseed/ Mustard seed/
Oil/ Cake
Soybean/ Meal/ Oil, Crude
Palm Oil
Gur, Rapeseed/ Mustardseed
Indian Cotton
Gur, Rapeseed/Mustardseed
Hessian, Sacking
Copra, Coconut oil & Copra
cake
Coffee
Gur,
RBD
Pamolein,
Groundnut Oil, Sunflower Oil,
Rapeseed/Mustardseed,
Rapeseed/Mustardseed Oil,
Rapeseed/Mustardseed oilCake, Soy bean, Soy Oil,
Copra,
CottonSeed,
Safflower, Groundnut, Sugar,
Sacking,
Coffee-Robusta
Cherry
AB,
Coconut
oil,
Castorseed,
Castor-oil,
Groundnut
oilCack,
Cottonseed oil, Sesamum oil,
Sesamum OilCake, Safflower
OilCake,
Rice
Bran
Oil,
Safflower
Oil,
Sanflower
OilCake,
Sunflower
Seed,
Pepper, Crude Palm Oil,
Guarseed, CastorOil Cake,
Cottonseed
Oilcake,
Aluminium Ingots, Nickel,
Vanaspati, Soybean Oilcake,
Rubber, Copper, Zinc, Lead,
Tin, Linseed, Linseed Oil,
Linseed
Oilcake,
Coconut
Oilcake, Gold, Silver, Rice,
Wheat, Cardamom, Kilo
Gold, Masoor, Urad, Tur /
Arhar,
Moong,
GuarGum,
Rapeseed 42, Raw Jute,
Coffee-Arabica Plantation A,
Chana,
Sugar
(S-30),
CUMINSEED, ISABGULSEED
Soy Bean, Refined Soy Oil
Mustard Seed
Expeller Mustard Oil, RBD
Palmolein, Crude Palm Oil,
Medium Staple Cotton, Long
Staple Cotton, Gold, Silver,
Rubber Kottayam, Pepper
Kochi,
Turmeric
Gur
Derivatives as a tool for managing risk first originated in the commodities markets.
They were then found useful as a hedging tool in financial markets as well. In India,
trading in commodity futures has been in existence from the nineteenth century with
organized trading in cotton through the establishment of Cotton Trade Association in
1875. Over a period of time, other commodities were permitted to be traded in
futures exchanges. Regulatory constraints in 1960s resulted in virtual dismantling of
the commodities future markets. It is only in the last decade that commodity future
exchanges have been actively encouraged. However, the markets have been thin
with poor liquidity and have not grown to any significant level. In this chapter we
look at how commodity derivatives differ from financial derivatives. We also have a
brief look at the global commodity markets and the commodity markets that exist in
India.
1. Difference between commodity and financial derivatives
The basic concept of a derivative contract remains the same whether the underlying
happens to be a commodity or a financial asset. However there are some features
which are very peculiar to commodity derivative markets. In the case of financial
derivatives, most of these contracts are cash settled. Even in the case of physical
settlement, financial assets are not bulky and do not need special facility for storage.
Due to the bulky nature of the underlying assets, physical settlement in commodity
derivatives creates the need for warehousing. Similarly, the concept of varying
quality of asset does not really exist as far as financial underlings are concerned.
However in the case of commodities, the quality of the asset underlying a contract
can vary largely. This becomes an important issue to be managed. We have a brief
look at these issues.
2. Physical settlement
Physical settlement involves the physical delivery of the underlying commodity,
typically at an accredited warehouse. The seller intending to make delivery would
have to take the commodities to the designated warehouse and the buyer intending
to take delivery would have to go to the designated warehouse and pick up the
commodity. This may sound simple, but the physical settlement of commodities is a
complex process. The issues faced in physical settlement are enormous. There are
A declaration verifying that the asset is free of any and all charges, including
financial debts related to the stored goods.
A warehouse certificate showing that storage and regular insurance have been
paid.
Assignment
Whenever delivery notices are given by the seller, the clearing house of the exchange
identifies the buyer to whom this notice may be assigned. Exchanges follow different
practices for the assignment process. One approach is to display the delivery notice
and allow buyers wishing to take delivery to bid for taking delivery. Among the
international exchanges, BMF, CBOT and CME display delivery notices. Alternatively,
the clearing houses may assign deliveries to
buyers on some basis. Exchanges such as COMMEX and the Indian commodities
exchanges have adopted this method.
Any seller/ buyer who has given intention to deliver/ been assigned a delivery has an
option to square off positions till the market close of the day of delivery notice. After
the close of trading, exchanges assign the delivery intentions to open long positions.
Assignment is done typically either on random basis or first-in-first out basis. In
some exchanges (CME), the buyer has the option to give his preference for delivery
location.
The clearing house decides on the daily delivery order rate at which delivery will be
settled. Delivery rate depends on the spot rate of the underlying adjusted for
discount/ premium for quality and freight costs. The discount/ premium for quality
and freight costs are published by the clearing house before introduction of the
contract. The most active spot market is normally taken as the benchmark for
deciding spot prices. Alternatively, the delivery rate is determined
based on the previous day closing rate for the contract or the closing rate for the
day.
Delivery
After the assignment process, clearing house/ exchange issues a delivery order to
the buyer. The exchange also informs the respective warehouse about the identity of
the buyer. The buyer is required to deposit a certain percentage of the contract
amount with the clearing house as margin against the warehouse receipt.
The period available for the buyer to take physical delivery is stipulated by the
exchange. Buyer or his authorized representative in the presence of seller or his
representative takes the physical stocks against the delivery order. Proof of physical
delivery having been effected is forwarded by the seller to the clearing house and the
invoice amount is credited to the seller's account.
In India if a seller does not give notice of delivery then at the expiry of the contract
the positions are cash settled by price difference exactly as in cash settled equity
futures contracts.
3. Warehousing
One of the main differences between financial and a commodity derivative is the
need for warehousing. In case of most exchange-traded financial derivatives, all the
positions are cash settled. Cash settlement involves paying up the difference in
prices between the time the contract was entered into and the time the contract was
closed. For instance, if a trader buys futures on a stock at Rs.100 and on the day of
expiration, the futures on that stock close Rs.120, he does not really have to buy the
underlying stock. All he does is take the difference of Rs.20 in cash. Similarly the
person, who sold this futures contract at Rs.100, does not have to deliver the
underlying stock. All he has to do is pay up the loss of Rs.20 in cash.
In case of commodity derivatives however, there is a possibility of physical
settlement. This means that if the seller chooses to hand over the commodity instead
of the difference in cash, the buyer must take physical delivery of the underlying
asset. This requires the exchange to make an arrangement with warehouses to
handle the settlements. The efficacy of the commodities settlements depends on the
warehousing system available. Most international commodity exchanges used
certified warehouses (CWH) for the purpose of handling physical settlements. Such
CWH are required to provide storage facilities for participants in the commodities
markets and to certify the quantity and quality of the underlying commodity. The
advantage of this system is that a warehouse receipt becomes a good collateral, not
just for settlement of exchange trades but also for other purposes too. In India, the
warehousing system is not as efficient as it is in some of the other developed
markets. Central and state government controlled warehouses are the major
providers of agri-produce storage facilities. Apart from these, there are a few private
NCDEX is a public limited company incorporated on April 23, 2003 under the
Companies Act, 1956. It obtained its Certificate for Commencement of Business on
May
9,
2003.
It
commenced
its
operations
on
December
15,
2003.
legislations.
centres.
NCDEX
currently
facilitates
trading
of
57
commodities.
you need
to
know about
our
company,
its people
and
associates"
MCX is an independent and de-mutulised multi commodity exchange. It was
inaugurated on November 10, 2003 by Mr. Mukesh Ambani, Chairman and Managing
Director, Reliance Industries Ltd.; and has permanent recognition from the
Government of India for facilitating online trading, clearing and settlement operations
for commodities futures market across the country. Today, MCX features amongst the
world's
top
three
bullion
exchanges
and
top
four
energy
exchanges.
producers/
processors,
traders,
corporate,
regional
trading
centre,
efficiency of price discovery. Being a nation-wide commodity exchange having stateof-the-art infrastructure, offering multiple commodities for trading with wide reach
and penetration, MCX is well placed to tap the vast potential poised by the
commodities market.
Financial Technologies (I) Ltd., State Bank of India and it's associates, National Bank
for Agriculture and Rural Development (NABARD), National Stock Exchange of India
Ltd. (NSE), Fid Fund (Mauritius) Ltd. - an affiliate of Fidelity International,
Corporation Bank, Union Bank of India, Canara Bank, Bank of India, Bank of Baroda ,
HDFC Bank and SBI Life Insurance Co. Ltd.
In this chapter we shall take a brief look at the trading system for futures on NMCE.
However, the best way to get a feel of the trading system is to actually watch the
screen and observe how it operates.
1. TYPES OF MARKETS
Trading Markets
I. Ready Delivery Market
II. Specific Delivery Market
III. Future Market
IV. Auction Market
I. Ready Delivery Market
Cash Trades
Cash Trades are done for one hour in the day and are settled the same day. The
Seller has to deliver the warehouse receipt and Buyer has to make payment before
the closure of the banking hours. On receipt of payment from the Buyer, Clearing
House will release and endorse the warehouse receipt in favor of the Buyer. All the
trades are settled individually on trade for trade basis.
Spot Trades
Spot Trades done for two hours in the day are settled on the third day from the date
of transaction. The settlement is done on T+2 day i.e. trade done on Monday will be
settled on Wednesday. The Seller has to deliver the warehouse receipt and Buyer has
to make payment before the closure of the banking hours on the third working day.
On receipt of payment from the Buyer, Clearing House will release and endorse the
warehouse receipt in favour of the Buyer. All the trades are settled individually on
trade-for-trade basis.
Weekly Trades
Trades for weekly settlements are done during the prescribed hours in the day are
settled on the fifth day from the date of transaction. The settlement is done on T+5
rolling day i.e. trade done on Monday will be settled on next Monday. The Seller has
to deliver the warehouse receipt and Buyer has to make payment before the closure
of the banking hours on the fifth working day. On receipt of payment from the Buyer,
Clearing House will release endorse the warehouse receipt in favour of the Buyer. All
the trades are settled individually on trade-for-trade basis. The transactions are not
netted for the purpose of settlement.
II. Specific Delivery Market
Features of Specific Delivery Contracts are:
These contracts will have delivery obligation maturing beyond a period of 11 days
The terms of delivery of commodities may vary from trade to trade as decided by the
contracting parties at the time of entering into transaction. Such specific terms could
be related to delivery date, delivery center, quality of commodity, pricing basis (FOB,
CIF), payment terms etc.
The transactions are not done on anonymous basis i.e. transactions are done
knowing the counter party.
Both the parties to trade enter into transactions after knowing the terms of contract,
which may vary from trade to trade. However, there are standard definitions for
various terms of contracts.
Exchange will monitor performance of these contracts and if required, impose mark
to market margins on the open, unsettled contracts depending upon the volatility in
the commodity.
All the members entitled to trade in a commodity will be allowed to trade in these
Specific Delivery markets.
III. Futures Market
The Futures Market is primarily intended for Hedging and Speculation. Contracts in
Futures Market results mostly in Cash Settlement and do not frequently result in
delivery. The Clearing House guarantees trades executed on the exchange. Contracts
that are not closed out and are due for delivery will be delivered and settled through
the warehouse receipts. NMCEIL is having 12 delivery month contracts as separate
contracts for each commodity being traded at NMCEIL. All contracts are settled on
daily basis at the daily settlement price till the final delivery of commodity on the
expiry date.
Futures market consists of various book types wherein orders are segregated as
Regular lot orders, Special Term orders, Negotiated Trade Entries and Stop Loss
orders depending on their order attributes. All orders have to be of regular lot size or
multiples thereof.
behalf of clients (Registered Non Members) or enlist Sub Brokers who may in turn
have their own set of clients. TM must settle all his transactions (and those of Sub
Brokers and Registered Non Member) through Clearing Members (Trading cum
Clearing Members or Institutional Clearing Members).
III. Institutional Clearing Members (ICMs):
are professional entities providing clearing services to their institutional clients (viz.
Trading Members and their Sub Brokers & Registered Non Members). They however
do not have the right to trade on their own account.
IV. Introducing Broker/Sub Broker:
is a Registered member of the NMCEIL who has the right to execute transaction in
the trading system of the exchange only through a TM/TCM. Sub-Brokers will settle
the transactions of clients introduced by them, through Brokers, who in turn settle
through Clearing Members (TCMs or ICMs).
V. Registered Non Member :
Is a person who is registered with the Exchange for the purpose of dealing in
commodities
through
TM.
Registered
Non-member
has
to
fulfill
such
prescribed
net
worth
for
an
applicant
is
Rs.
50
lakh.
Net worth certificate should be computed for this purpose by following a definition of
net worth adopted by practising Chartered Accountants for finalisation of accounts.
Existing fund based asset , if any should be excluded for calculation of net worth.
In case, the company is a member of any Commodity Exchange(s), it should satisfy
the combined minimum Net Worth requirements of all these Exchanges including
NMCEIL.
Paid-up Capital:
Minimum
prescribed
paid
up
capital
for
corporate
is
Rs.
30
lakh.
In case of a partnership firm combined capital of all the partners should be at-least
Rs.30 lakh.
No.
Amount
(Rupees in Lacs)
Details
1.00
1.00
1.00
0.20
Total Amount
10.00
13.20
Forward markets
Commission(FMC)
National Multi-Commodity
Exchange (NMCE)
Institutional Clearing
Members (ICMs)
Trader
Client / Non
Registered Member
The objective of NMCE is to organize trading in such a way that possibility of defaults
is almost eliminated. To achieve this, NMCE has adopted various margins as follows:-
I. Exposure Limits:
Exchange provides facility in the system enabling the TCMs to select the commodities
in which the TM can trade and also fix the trading limits for each TM. TCM can also
monitor the position of TMs online.
II. Initial Margin:
The initial margin (IM) is levied on all open positions (Buy or sell positions) of the
members and their clients. The IM percentage on each commodity varies depending
upon its market volatility. The margin so calculated is reduced from the total margin
of the member available with the exchange and accordingly further exposure is given
on the balance amount. As the IM increases, the exposure shall decrease.
III. Mark to Market (MTM) Margins:
MTM is a mechanism devised by the exchanges to prevent the possibility of the
potential loss accumulating to the level where the participants might willingly or
unwillingly commit default. All trades done on the exchange during the day and all
open positions for the day are marked to closing price for the respective
delivery/contract and notional gain or loss is worked out. Such loss/gain is
debited/credited to respective members account at the end of each day. The
outstanding position of the members is then carried forward the next day at the
closing price.
IV. Special Margins :
have primarily been introduced not as a risk management tool, but to act as a
speed-breaker for sharply rising or falling price. It is applied when price reaches a
particular level above/below the previous days closing price.
V. Delivery Margins :
are applicable to the contracting parties (both, buyer and seller) from the 12th day of
the contract maturity month.
VI. Price Bands: Daily Cap & Life Time Cap:
have been imposed on all commodities to prevent extreme volatility and unhealthy
practices of cornering the market.
VII. Final Settlement:
On the expiry of the futures contracts, the settlement is by the way of delivery. The
delivery is at sellers option between 12th to 15th of the delivery month. The payin/pay-out for delivery is by way of debit to the buyer and credit to the seller to the
relevant Clearing Members clearing bank account on T+3 day (T=date of allocation
of
delivery).
On 15th if seller fails to tender delivery or fails to square-off his position then the
highest price of the contract during its currency is taken for cash settlement in
marking all undelivered outstanding position to final settlement price.
Resulting
6. DELIVERY MECHANISM
One of the methods of settling the contracts is by taking or making delivery. Delivery
period at NMCE is 12th to 15th of the delivery month. During this period Members of
the exchange are not permitted to create any fresh position in the expiring contracts.
They can either square up their position or take/give delivery to settle their
outstanding contracts. Various steps required to be followed by the participants
having outstanding position on 12th of delivery month are as follows:
Steps to follow:
1) Sellers and buyers have to convey intention on or before 12 th of the delivery
month.
2) The intentions are then matched and assigned by the Exchange with the
corresponding buyers. As is the case universally, seller has freedom to tender
delivery during the delivery period at any approved delivery centers. In other words,
buyer cannot demand delivery at delivery center of his choice. When the seller gives
intimation, a call is made to the corresponding buyer to whom the delivery is
assigned by the Exchange. Delivery margin is collected from both the buyer and
seller.
3) After matching the open positions of relevant buyer and seller, the same is
transferred from the system and settled at the closing price of the preceding day, so
that mark to market (MTM) is not levied or paid to the member.
4) Within three days from the position transfer, the buyer has to maintain the
required funds in their clearing & settlement account while the seller has to tender
the warehouse receipts to the exchange along with the computation of warehouse
charges. On the 3rd day, the exchange makes pay-in & payout simultaneously after
retaining the warehouse charges margin and sales tax margin from the buyer and
seller respectively.
5) After the completion of pay-in and payout, duly endorsed warehouse receipts are
sent to the buyer immediately.
6) Settlement of warehouse charges, margins and sales tax margins take place soon
after receipt of relevant documents (copies of sales bill, sales tax form) from the
member.
Exchange looks over the commodities to be delivered from the open positions of members
5 days
prior to
the end of
the
contract
month.
Exch
ange
gives
notic
e of
Deliv
ery
with
detail
s of
lots
to be
deliv
ered
Matching of Open
Positions in Between
Buyers & Sellers
The Buyer has to keep the
money ready
On T+3
day
Tr Po
a n si
sf tio
er n
ta
ke
Pl
s
ac
e
P
Pa ayy- in
ou
t
After Completion of Pay-in & Pay-Out process Warehouse Receipts received from the
seller are sent to the buyer
On
Delivery
day
7. WAREHOUSE RECEIPT
Sample CWC Warehouse Receipt
The term Warehousing Receipt has been defined in The State Warehouses Act.
Receipt means a Warehouse Receipt in the prescribed form issued by a Warehouse
Man to a person depositing goods in the warehouse. A licensed warehouseman is
authorized to issue a negotiable or a non negotiable warehouse receipt. It evidences
a contract for storage of goods. It is accepted by the commercial banks as collateral
security for grant of loan against the goods stored in the warehouses. A warehouse
receipt can be negotiated by endorsement and delivery. It is a document of title of
goods as per the Sale of Goods Act, 1930. The goods covered by a negotiable
warehouses receipt can be transferred by an endorsement on the Warehouse Receipt
and its delivery to the endorsee. A person to whom warehouse receipt is negotiated
acquires a title to the goods in respect of which such warehouse receipt has been
issued. The endorsee gets a right to have the possession of goods covered by such
warehouse receipt as per the terms and conditions contained in such receipt. The
endorsee also gets a right to have such goods delivered to him or his authorized
agent by the warehouseman.
No country in the world produces as many kinds of spices as India. At present, India
produces around 2.5 million tonnes of different spices valued at approximately 3
billion US $, and holds the premier position in the world. Because of the varying
climates - from tropical to sub-tropical totemperate-almost all spices are grown in
this country. In almost all of the 25 states and seven union territories of India, at
least one spice is grown in abundance.
1. SPICES BOARD
The Spices Board was constituted as a statutory Body on 26th February, 1987 under
the Spices Board Act, 1986. The Board was set up with the objective of development
of cardamom industry and export promotion of all the 52 spices listed in the Spices
Board Act, 1986. Some of the major spices among them are pepper, chilli, ginger,
turmeric, cardamom, coriander, cumin, fennel, fenugreek, celery, vanilla and saffron.
The Board has its head office at Kochi and is headed by a Chairman. The primary
functions of the Board are - increasing the production and productivity of small and
large cardamom; development, promotion and regulation of export of spices;
assisting and encouraging studies and research for improvement of processing;
grading and packaging of spices; striving towards stabilization of prices of spices for
export; upgrading quality for export.
monitoring
domestic
undertaking,
prices;
increasing
assisting
or
encouraging
consumption;
scientific,
improving
technological
and
marketing;
economic
development of exotic and high value spices like vanilla, herbal spices and organic
spices etc.
Various programmes were implemented by the Spices Board for the development of
cardamom which includes production and supply of planting material, cardamom
replanting scheme, irrigation and land development, extension advisory scheme,
post harvest improvement of spices, development of exotic and high value spices and
organic farming. The Board is also implementing programmes for supporting
production and processing of vanilla. Tribal growers of cardamom were assisted by
implementing
various
developmental
programmes
with
enhanced
financial
assistance. Besides, Indian Cardamom Research Institute under the Spices Board
carries out need based research programmes for the crop improvement work in
cardamom as also post harvest techniques.
Chillies, pepper, ginger, turmeric, seed spices, coriander, cumin, fenugreek, curry
powders and spice oils and oleoresins are the main spices/spice products exported
from India. The Board is implementing a number of schemes aimed at export
development of spices with a view to meet international standards and promotion of
export of value added spices. The Board has well established quality evaluation and
upgradation laboratory at Cochin which is engaged in surveying the quality of spices
procured form different producing and marketing centres. It offers training of quality
upgradation to growers and exporters and undertakes physical, chemical and
biological analysis of the samples brought by the exporters.
In order to increase exports of spices from India, the Spices Board implements
various strategies that are focussed on high end value addition, adoption of modern
processing technologies, development of new spice products and new end uses for
spices, creation of niche markets for Indian organic spices, promotion of spice
production and processing in the North East, expansion of spices export basket,
promotion of integrated pest management, harmonization of standards, etc.
The
2. STATEWISE PRODUCT
State
ANDHRA PRADESH
ARUNACHAL
PRADESH
ASSAM
HARYANA
BIHAR
GUJARAT
HIMACHAL
PRADESH
JAMMU & KASHMIR
KARNATAKA
KERALA
MADHYA PRADESH
MAHARASHTRA
MEGHALAYA
MIZORAM
ORISSA
PUNJAB
Product
Chilly ,Ginger , Mustard Turmeric
Aniseed , Turmeric
Garlic
Ajovan,Garlic, Mustard,Turmeric
Chilly,Cumin,Dill Seed,Fennel,Fenugreek,Garlic
Ginger
Ajovan,Saffron
Cardamom (Small),Chilly,Clove,Garlic,Ginger
,Kokam,Nutmeg & Mace,Pepper,Turmeric,Vanilla
Cardamom (Small),Cinnamon & Cassia,Clove,Ginger
,Nutmeg & Mace,Pepper,Turmeric,Vanilla
Chilly,Garlic,Ginger
Chilly,Garlic,Pomegranate Seed,Turmeric
Ginger ,Turmeric
Ginger
Chilly,Garlic,Ginger ,Turmeric
Aniseed,Celery
RAJASTHAN
SIKKIM
TAMIL NADU
TRIPURA
UTTAR PRADESH
WEST BENGAL
Chilly,Cumin,Coriander,Dill
Seed,Fennel,Fenugreek,Garlic
Cardamom (Large),Ginger ,Tejpat
Cardamom (Small),Chilly,Cinnamon &
Cassia,Clove,Ginger ,Herbal & Exotic Spices,Nutmeg
& Mace,Pepper,Pomegranate Seed,Turmeric,Vanilla
Turmeric
Aniseed,Celery,Chilly,Coriander,Cumin,Fennel,
Fenugreek,Garlic, Mustard,Turmeric
Cardamon (Large),Chilly,Ginger ,Turmeric
The world trade in spices during 2004-05 is estimated at 7.50 lakh tonnes of which
Indias share was 45 percent. In 2003-04, the total production of spices in the
country is estimated around 37.40 lakh tonnes. While almost all States produce
spices, the important states accounting for sizeable area and production are Kerala,
Karnataka, Tamil Nadu, Andhra Pradesh, Rajasthan and Maharashtra.
Board has formulated and implemented a three tier quality certification programme
conforming to HACCP. Award of Spice House Certificate for good manufacturing
practices, award of Logo for quality of the product and accreditation under ISO 9000
for international acceptance are the three certification systems adopted by the
Board. Yet another area of activity centered upon by the Board is Value Addition.
India can now boast as the monopoly supplier of spice oils and oleoresins the world
over. In the case of curry powders, spice powders, spice mixtures and spices in
consumer packs, India is in a formidable position. The consistent effort of the Board
during the last one decade has improved the share of the value added products in
the export basket to more than 60%.
With the support of the Spices Board, exporters have established adequate
infrastructure for improving quality on a sustained basis. Quality improvement and
(QUANTITY)
(VALUE)
I. pepper
Botanical name
Piper nigrum L.
Family name
Piperaceae
Commercial part
Fruit
Indigenous to India, pepper, rightly called the King of Spices, is one of the oldest and
best-known spices in the world. India has always reigned supreme in the production
and
export
of
this
most
exotic
and
sought-after
spice.
Indian pepper had a profound influence on the European economy of the Middle
Ages. Many western countries owed their prosperity to this spice which fetched them
a very high price. Easily the finest in quality anywhere, Indian pepper is grown in the
monsoon forests along the Malabar coast in South India. Here, a combination of
natural adavantages and organic techniques produces bigger, better-shaped, more
aromatic
and
flavourful
berries.
Two of the most celebrated trade varieties of Indian black pepper are 'Malabar
Garbled' and 'Tellichery Extra Bold'. India also offers green pepper in several
processed forms - frozen, dehydrated, freeze-dried and packed in brine. Pepper is a
perennial climber requiring the support of live or dead standrads.
Cuminum cyminum L.
Family name
Apiaceae
Commercial part
Fruit
The dried fruit of a small herbaceous plant, cumin was quite popular even during the
Biblical times as an efficient digestive and as a food flavour for ceremonial feasting.
Though native to Egypt and the Mediterranean, cumin is now mostly produced in
India.
Cumin has an intensely strong flavour, much similar to caraway. Indian cumin finds
worldwide use in foods, beverages, liquors, medicines, toiletries and perfumery.
Indian cumin grows abundantly in the mild, equable climate of Gujarat, Rajasthan
and Uttar Pradesh where rich, well-drained, sandy, loamy soil and the sunny,
conducive
environment
are
available.
Indian cumin is exported in its natural as well as powdered form, besides as essential
oil. Exports are mostly to USA, Singapore, Japan, UK and North Africa.
Botanical name
Capsicum frutescens L.
Family name
Solanaceae
Commercial part
Chilly is the universal spice of India. It is cultivated in all the States and Union
Territories of the country. The important States growing chilli are Andhra Pradesh,
Orissa, Maharashtra, West Bengal, Karnataka, Rajasthan and Tamil Nadu. Andhra
Pradesh alone commands 46% of the chilli production in India. As per the latest
statistics, India produced 8,00,100 tonnes of dry chilli from an area of 9,30,000
hectare.
Chilli has two important commercial qualities. If some varieties are famous for red
colour because of the pigment capsanthin, others are known for biting pungency
attributed by capsaicin. India is the only country rich in many varieties with different
quality
factors.
While consumption of chilli is the highest in India, maximum export is also from this
country. India made the record export of 51,900 tonnes of dry chilli in 1996-97.
Oleoresin of chilli with low, medium or high pungency is also exported in large
quantities. Chilli powder is another important item of export. Indian chilli and its
products are brought by a number of countries. Important among them are Sri
Lanka, Bangladesh, South Korea and USA for dry chilli and USA, Germany, Japan, UK
and France for oleoresin. India can supply chilli in whole, crushed, powder or
oleoresin forms in consistent colour and required pungency.
IV. Turmeric
Botanical name
Curcuma longa L.
Family name
Zingiberaceae
Commercial part
The dried rhizome of a herbaceous plant, turmeric is closely related to ginger. The
spice is also sometimes called 'Indian saffron' thanks to its brilliant yellow colour.
Indian turmeric has been known to the world since ancient times. Several unique
properties of Indian turmeric make it the ideal choice as a food flavour, an effective
ingredient
in
medicines
and
cosmetics,
and
as
natural
colourant.
With its rich curcumin content, which imparts the distinctive yellow colour, and other
inherent qualities, Indian turmeric is considered the best in the world. India is today
the largest exporter of turmeric to discerning countries like the Middle East, the UK,
USA
and
Japan.
Some of the well-accepted varieties are: 'Alleppey Finger' and 'Erode turmeric' (from
Tamil Nadu), 'Rajapore' and 'Sangli turmeric' (from Maharashtra) and 'Nizamabad
Bulb' (from Andhra Pradesh). India also exports turmeric in powder form and as
oleoresin.
INTRODUCTION
Pepper the king of spices originated in the monsoon forests of Malabar Coast in
southwest India. It is one of most popular and oldest spice in the world, its earliest
usage about 4000 years ago. It is a perennial, climbing vine indigenous to the
Malabar Coast of India. This pungent spice made from its berries is one of the
earliest spices known and is probably the most widely used spice in the world today.
It was mentioned as far back as 1000 BC in ancient Sanskrit literature. In early
historic times black pepper was widely cultivated in the tropics of Southeast Asia,
where it became an important article of overland trade between India and Europe. It
is marketed in four different varieties - white, green, red and black peppercorns. It
became a medium of exchange, and tributes were levied in black pepper in ancient
Greece and Rome. The name pepper comes from the Sanskrit word pippali meaning
berry. The most popular varieties from India, Malabar Garbled and Tellicherry Black
pepper, still dominates in production and consumption.
SEASONALITY
In India harvesting of pepper starts from December end and extends till March
beginning. However, harvesting period differs from other major competitors in the
world. During may to September most of the countries completes harvesting.
During the last 5 years Vietnam has dramatically increased the area under
production of pepper causing a major change in the supply dynamics of pepper. The
area under production has been increasing marginally during the last 3 years.
Excluding Vietnam this would have almost stagnated as most of this increase was
contributed by Vietnam.
Pepper production in India is stagnated since 2002 after severe drought hit and poor
international demand. It has changed 33.335 growths in 1999 to zero growth in last
five years. Even in Indonesia and Malaysia production is stagnated. This year season
pepper production in all the major countries like Vietnam, Brazil, Malaysia, and
Srilanka is decreased by 25% to 30%. But in 2005, India achieved a little growth in
pepper production as compare to last few years. World pepper Production in major
producing counties is less against the projected demand of 216000 Mt in 2005 (last
season), the total quantity available for export from all producing countries
estimated to be only about 171900 MT.
INDIAN SCENARIO
India holds a supreme position in the production of pepper. Two of its celebrated
varieties are `Malabar Garbled and `Tellicherry extra bold. The finest Indian pepper
is grown in the monsoon forests of the Malabar Coast in Kerala. Kerala is the
originated place of black pepper in India. It grows nearly 95% of the country's black
pepper, with the remaining being grown in Karnataka and Tamil Nadu. Small amounts
are also grown in Goa, Andhra Pradesh, Orissa and Assam. India exports to more
than 120 countries. India produces about 52 varieties of spices and is the world's
second largest producer and exporter. Generally around 75% of production of pepper
is exported. The consumption in producing countries except in India is insignificant.
India consume about 30 40,000 MTs of pepper.
India has a relatively stable production capacity. For the past few years, its local
production has been absorbed by its local consumption and inter-border trade. Its
exports have been steadily declining, while its imports are growing. Maximum
anticipated export figure would be at 10,000 tons. Even then, India may have to
import a significant amount before it can export. Pepper production in the India fell
by nearly 30% in the last season due to erratic monsoon in the growing regions.
Inappropriate pollination and poor berry formation due to heavy rains and exhausted
pepper spikes and with yield about 50% lesser production.
42,900
Karnataka
Tamil
1,525
Nadu
500
Andamans
Total
75
45,000
IMPORT OF PEPPER
There is an improvement in prices particularly in India, where the average spot price rose
marginally by 1%. Trading at the Commodity Exchange was active.
The United States imported 70,540 tons of pepper in 2006 valued at US$ 135.5 million
comprising 55,500 tons of black, 7,800 tons of white and 7,240 tons of ground pepper. This was
an increase of 5% compared to import of 66,890 tons in 2005. Import of black pepper increased
by 6% and 8% for white pepper, while import of ground pepper declined marginally by 3%.
Vietnam, Brazil, Indonesia and India were the main sources of pepper imported into the United
States. Import of white pepper originated mostly from Indonesia and Vietnam, while import of
ground pepper were mostly from India and Germany.
USA
Netherland
Singapore
Germany
The pepper harvest in Lampung has been completed and the output is estimated to
be only 75 per cent of previous year's crop. Good demand during the harvesting
season has absorbed pepper quickly from the farm level.
Vietnam
Vietnam pepper output is also estimated to decrease in 2007. Pepper production in
Vietnam was lower than previous year because of drought occurrence. The rainy
season ended earlier than expected which affected the crop output. Production in
Vietnam, the world's top producer of pepper, is estimated to be around 10000 tons.
Vietnam has traded 70 per cent of its domestic production and has virtually moved
out of global scene.
Indonesia
Due to lower prices for pepper in the world market in last year discouraged many
farmers to shift their crop from pepper to other cash crop. Indonesia has also got the
bumper crop from past few years so there are chances of exhaust of the pepper
vines and it takes time to recover.
China
Increased domestic demand for pepper forced china to import of pepper from
Vietnam last year. There is considerable increase in consumption of pepper by china.
There are chances of increase in prices of pepper due to high domestic demand in
China.
Malaysia
Compare to other pepper producing countries Malaysia has higher cost of production
of pepper in due to higher labour cost and higher cost of living, production of pepper
in Malaysia is facing a downward trend.
PRICE ANALYSIS
Pepper is the perennial crop, the production mainly depends on the southwest
monsoon during (June and July) that time flowering in pepper wines determines the
production level for that particular year. Based on the spot market the details of
arrival pattern of Pepper in Kochi market as depicted below.
Arrivals Patters in Kochi Market (Daily average arrivals)
February to April 4000 tonnes
May to August NO ARRIVALS ONLY AFLOAT PARCELS THROUGH BROKERS
September to November SAME AS ABOVE
ESTIMATION
PARTICULARS
QUANTITY
CROP 2006-07
CARRY OVER STOCKS
TOTAL
ANTICIPATED IMPORTS
BALANCE
EXPECTED EXPORTS
DOMESTIC CONSUMPTION
REMAINING BALANCE
37/42000 TONNES
20000 TONNES
62000 TONNES
15000 TONNES
77000 TONNES
12900 TONNES
50000 TONNES
14100 TONNES
FACTORS TO WATCHOUT
FUNDAMENTAL SCENARIO
Incessant heavy rains last year coupled with diseases are said to have
resulted in a sharp fall in the pepper production in the country. The upward
trend in the futures market has led farmers here to hold back anticipating
further rise in the prices. Arrival of un-garbled pepper has dropped.
Lower crop in major producing countries like Vietnam, Brazil and Malaysia due
to unfavorable weather conditions.
At the same time, global pepper consumption is estimated to grow at 3.46 per
cent a year.
It is likely that there would be a tight supply position this year also.
Prices are going continuously up in 2007 but because of Export demand may
increase in April, which can give support to falling prices
INTRODUCTION
Cumin seed commonly know as Jeera (Cuminum cyminum) belongs to Apiacae
family. Though Cumin is a native of Egypt, it now mostly produced in India. India is
the largest producer and consumer of Jeera (cumin seed) in the world. Jeera is an
ancient spice having a history of over 5000 years and referred as native to the
historical Levant region and northern Egypt. It had a major role as a flavoring, spice
and medicinal uses throughout history. Cumin is used mainly where highly spiced
foods are preferred. It features in Indian, Eastern, Middle Eastern, Mexican,
Portuguese and Spanish cookery. It is an ingredient of most curry powders and much
savoury spice mixture. Indian cumin finds worldwide use in foods, beverages,
liquors, medicines, toiletries and perfumery. The production of Jeera in major
competitive countries also affects the demand and prices of Jeera. The production of
Jeera in Turkey, Iran and Syria affects the export prices and volume of Jeera. Jeera is
a tropical plant and grown in cooler regions which is best suited for sandy soil. It is
grown from the seed. It requires less water and more cold for its better growth with
ideal temperature of 25 to 30 degree. High humidity during flowering & fruit set,
causes fungal diseases in this crop.
USAGES
It had a major role as a flavoring, spice and medicinal uses throughout history.
Cumin is used mainly where highly spiced foods are preferred. It features in Indian,
Eastern, Middle Eastern, Mexican, Portuguese and Spanish cookery. It is an
ingredient of most curry powders and much savoury spice mixture. Smoke in a pipe
with ghee, it is taken to relieve the hiccups. Cumin also stimulates the appetite.
Moreover Indian cumin finds worldwide use in foods, beverages, liquors, medicines,
toiletries and perfumery.
CULTIVATION PATTERN
Cumin plant basically thrives on a hot, tropical climate, but can also be cultivated in
the cooler regions in a green house. The cumin crop can be produced on almost all
soil types but the soil, which suits the best to this crop, is a well-drained, fertile
sandy soil type. It needs a minimum of 3 to 4 months of duration period after which
it is harvested. Cumin plant has a good tap root system that makes it a drought
resistant plant.
In India the jeera plant is grown as a Rabi crop i.e. it is sown in the winters in the
months of October to December and is harvested in the months of February, March
and April. In other cumin cultivating countries in the Middle East, the crop is planted
in the months of April and is harvested in the months of August and September. The
plant becomes mature and ready to harvest when it turns yellowish brown. After the
crop gets harvested, the cumin seeds are cleaned up through the winnowing process.
SEASONALITYSo
wing Duration
Showing
OctoberNovember
Duration
4 Months
Harvesting
Production
Major
Major importing
centres
producing
countries
February-
Gujarat,
countries
India,
Bangladesh, Brazil,
March
Rajasthan
Turkey,
Iran, Syria
Singapore, UAE, UK
Duration of Jeera crop is about four to five months. Sowing season starts during
October continues till November. Harvesting starts from February and will continue
till March. Jeera crop is highly sensitive to rain, if rain occurs during harvesting time
(February to March) quality of the Jeera will be badly affected and which affects
production also. It will turn black color and fetches lowest price in the market.
Moisture content will be high during this season and may affect the quality.
Harvesting season in Iran, Syria and turkey is May June.
Mehasana (Unjha)
i.
Sabor Khati
ii.
Patan
iii.
Kutchh
iv.
Saurashtra
Rajasthan
PRODUCER COUNTRIES
India
Mexico
Portugal
Spain
Turkey
China
Japan
Netherlands
France
Morocco
The world market structure regarding jeera is very much concentrated as bulk of the
production is performed by a fewer countries and only those countries are able to
export this spice to the rest of the world. The major cumin seed exporting countries
are India, Turkey and Iran.
India was the primary exporter of cumin seeds and cumin oil in the world since few
years but comparatively new entrants in the market like Turkey and Iran are
providing stiff competition to now. These countries are able to provide the spice at
much cheaper prices than India and hence are gaining advantage over it. Most of the
cumin seeds are exported to the countries that do not produce jeera themselves and
make huge markets for the spice.
FOREIGN CONSUMERS
United States
Singapore
Japan
United Kingdom
Saudi Arabia
Bangladesh
Brazil
Nepal
Malaysia
INDIAN SCENARIO
India occupies first in production and consumption of Jeera in the world. Indias
production sums up to 1 to 2 lakh tons of jeera per year that makes it the leading
producer in the world. It contributes about 70% in the total world production. The
Industry size estimated to be around 650crore per annum. Average annual
production ranges from 1 to 2 lakh MT. The area underwear in India declined from
307046 hectares in 1996-97 to 288832 hectares in 1997-98.where as production
remained steady due to higher yield levels (Average 385 kgs/ha) .The area under
cumin in India increased from 3,15,781 hectares in 2000-01 to 5, 26,634 hectares in
2001-02 and the output increased from 1, 39,356 tons to 2, 06,410 tons in 2001-02.
Acreage under Jeera has declined from 147900 hectares in 2003-04 to 76600
during2004-05, about 51% of the area fallen during this period
It was 76600 hectares in 2004-05 and that was increased up to 362000 hectares in
2005-06 .It is again expected to increase up to 412000 hectares in 2006-07. In
Gujarat, the area has increased by about 17000 hectares in 2006-07. The
consumption of cumin seed in rest of the world, leaving India aside is only between
25,000 to 30,000 tons.
The production of cumin was 143000 MT in 2003-04 that was increased to 156000
MT in 2004-05. But again because of unexpected rain it fell to 121000 MT in 200506. Jeera whereas production was estimated to be at around 35,000 to 40,000 MT
during 2006-07 as a result of severe crop damage in Rajasthan due to unseasonal
rain. March and April are the sowing season of Jeera in major growing countries like
Turkey and Syria. Cloudy weather conditions and rain during this period may delay
the harvesting as well as lower production level of Jeera in these countries.
PRICE TRENDS
The price of jeera becomes highly uncertain during the period of January to march
because this is the harvesting season for cumin that determines the total amount
supply that severely affects the price of the jeera. Again during the months of august
to December there would be less supply again the amout of demand as this period
faces no increase of supply from any part of the world. may July is the harvesting
season in Iran, Syria and turkey that provides fresh supply to the market that
decrease the export of India so price of jeera goes slightly down.
In, India Jeera production is confined to Gujarat and Rajasthan as these are the
major producing states in our country. These states contribute around 90% to the
total production. Rajasthan stands first in both area and production with 50% to
60%contributing to the total production, followed by Gujarat contributing around 40
to 50percent to the total production in the country.
In Rajasthan the area under cultivation during year 2000-2001 is 1,99,839 hectares
with production of about 76760 M.T. The area in Rajasthan has increased drastically
to 321201 hectares in 2002-2003 compared to 2000-2001. However, area in Gujarat
remained steady compared to Rajasthan. In 2006, Area under Jeera has come down
in both states as a result of higher prices of Fennel seed in the market. The lesser
attractive prices of Jeera influencing many farmers to shift from Jeera to other cash
crops. Jeera production in Rajasthan declined from 145110 tones in 2001-02 to
70478 tones during 2002-03. Where as production in Gujarat remained steady at
62000 tones.
Barmer (Rajasthan)
Jalore (Rajasthan)
Nagaur (Rajasthan)
Pali (Rajasthan)
Ajmer (Rajasthan)
Bhilwara (Rajasthan)
Tonk (Rajasthan)
Jodhpur (Rajasthan)
Jaisalmer (Rajasthan)
Sirohi (Rajasthan)
Sikar (Rajasthan)
Bikaner (Rajasthan)
Banaskantha (Gujarat)
As on November 30, the shipments stood at 20,250 tonnes tonne worth Rs 151.5
crore against the set target for 2006-07 of 20,000 tonnes worth Rs 130 crore, while
exports in the same period last fiscal were at 6,026 tonnes worth Rs 46.69 crore. In
terms of value, it has crossed the target of Rs 130 crore by Rs 21.50 crore.
JEERA TRADE
India is the major producer, consumer and exporter of Jeera in the world. India
exports cumin seed to Bangladesh, Japan, Malaysia, Nepal, Pakistan, Singapore,
South Africa, UAE, UK, USA and many other countries and cumin seed powder to
Canada, UK, USA, etc.
The highest-ever exports in the past were 18,891 tonnes worth Rs 178.35 crore in
2000-01. Shipments of cumin, which began in 1960-61 with 1,201 tonnes worth Rs
20.1 lakh, crossed the 10,000-tonne mark only in eight financial years during the
past 46 years.
EXPORT PROFILE
Indian exports of Jeera declining on account of stiff competition from Turkey, Syria
and Iran. They are capturing our export market by offering Jeera at lower prices and
bulk of their production is reserved for export purpose. The total export of Jeera from
India during2000-01 was 18891 tones valued Rs. 17835 lakh. India's exports of
cumin seed fell from 10,422 tons valued at Rs.93 crores in 2002-03 to 7,957 tons
valued at Rs.59 crores in 2003-04. India exports cumin seed to Bangladesh, Brazil,
Japan, Malaysia, Nepal, Singapore, UAE, UK, the US and many other countries and
cumin seed powder to UK, the US, etc. India also exports oleoresins of cumin seed
and cumin seed oil to USA, UK, UAE, etc in 2001-02, India exported 2231 tons of
oleoresins oil valued at Rs 3494 lakhs.
.
WORLD SCENARIO
Major importing destinations for Jeera from the producing centers are USA, UK, EU,
Singapore, Middle East and South East Asia. The world demand for cumin is around
12000 to 15000 tones. From India average quality Jeera has been exported to
Bangladesh and Gulf countries. Where as EU usually imports the superior quality
Jeera form the producing countries. With supreme quality India stands first in export
market although there is stiff competition from other producing countries.
SYRIA
Crop had better crop this year with production of Jeera around 3 to 4 lakh bags.
However, recently it hiked the Jeera prices in international market by $15 to $45 per
MT due to huge demand.
TURKEY
Turkey is not entering to international markets due to lesser crop. The cumin seeds
prices are sky-rocketing in Turkey, in spite of total lack of buying demand, due to
local speculation within turkey and reports of a very small new crop may lead to
lesser supply to the world market.
IRAN
Although Iran is the major producer of Jeera, it has imported about 50,000 quintals
of Jeera this year as crop has been severely damaged due to bad weather conditions.
Newly harvested crop reported to be poor quality and will not meet the international
specifications.
UNJHA JEERA
Arrivals Patters in Unjha Market (Daily average arrivals)
February to April 25,000 to 35,000
May to August - 4,000 to 8000 bags
September November 6,000 to 8,000 bags
Note: 1 bag = 40 to 60 kgs. 25,000 t o 35,000
Prices look strong in the coming season as depicted by the above price graph. The
Average prices during 1989-90 were Rs.1450 per quintal and it has increased to
Rs.7081 per quintal in 2001-02. Currently the average model prices were quoting at
Rs. 6000 to Rs 6500 per quintal in Unjha market. Over the years prices were
increasing due to lower crop, heavy export orders and increased domestic demand
Jeera usually follows the three year cycle (price) as depicted in the above graph.
Every three years prices will fall and will go up after completion of the cycle. It was
Compared to other months February, March April months were having lower prices
due to heavy arrivals to the market. Prices were high in the month of July to
September. As harvesting starts from February, arrivals in the spot market starts
from February end and continue up to March April and then decreases in May-June.
During June to September prices of Jeera were at peak levels because huge demand
from the exporters and local retailers. Due to lower availability during these months
only stocks have to meet the demand. Prices are expected to rally during June to
October as depicted from the above graph. More exports orders and shortage of
supply may lead to rally in the prices.
PRICE TARGET
The prices of Jeera mainly depend on the exports and domestic demand. Huge
overseas demand and lower crop in competitive countries may lead to spurt in the
domestic Jeera prices.
ESTIMATION
PARTICULARS
QUANTITY
CROP 2006-07
CARRY OVER STOCKS
TOTAL
ANTICIPATED IMPORTS
BALANCE
EXPECTED EXPORTS
DOMESTIC CONSUMPTION
REMAINING BALANCE
35/40000 TONNES
40000 TONNES
80000 TONNES
NIL
80000 TONNES
Nearly 18-20 thousands bags/day are coming at the Unjha market with steady
demand of 13-14 thousand bags/day.
Seasonal variations
Weather fluctuations
Flow of information
FACTORS TO WATCHOUT
Farmers may shift crop from Jeera to Fennel seed next season because of
prevailing higher prices of Fennel compared to Jeera.
Next crop sowing will be in October - November and new crop will be available
for market only after February next year.
Arrivals may come down further from next month onwards as arrivals from
farmers and stocks will dry up slowly.
i.
The prices display high volatility due to its seasonal nature and
widespread
ii.
iii.
FUNDAMENTAL SCENARIO:
The most active Jeera futures at NCDEX gained Rs.1300 in last one month
following strength in the spot markets. Declining arrivals due to end of the
harvesting season resulted in the sharp rally and strong sentiment in the
international markets also fuelled the upsurge in the prices. Lower production
in major producing countries like Turkey and Iran kept the produce in
demand. We expect further upward movement in prices and the following are
the factors to watch out for
Daily average arrivals in the Unjha physical market are around 7000 to 9000
bags compared to 25000 30000 bags in the peak season.
Lower Jeera prices in last month attracted many traders and stockists for
heavy buying in the spot market and huge stocks by them may lead to heavy
speculation in the futures market
INTRODUCTION
Chilli (Capsicum annuum L.; Capsicum frutescene L.), also called red pepper, is an
important cash crop in India and is grown for its pungent fruits, which are used both
green and ripe (the latter in the dried form) to impart pungency to the food. As a
condiment, it has become indispensable in every Indian home. It is also used
medicinally, and in chutnies and pickles. The pungency is due to the active principle
`capsicin contained in the skin and the septa of the fruit. The world consumption of
chillies and paprika is going up due to the increasing popularity of ethnic foods. The
increased availability of oleoresins and spice oils of chilli has also enhanced its
consumption in various food preparations. India is the largest producer of chillies in
the world but its production pattern is highly erratic.
AREA OF CULTIVATION
The chilli crop is grown from almost the sea-level up to an altitude of 1,500 metres in
tropical and subtropical regions, with an annual rainfall of 60-150 cm. In India,
chillies are now grown in almost all parts. At present, Andhra Pradesh, Karnataka,
Maharashtra, Orissa, Rajasthan, Tamil Nadu and West Bengal account for 85.8 per
cent of the total area and 89.3 per cent of the total output of chillies in the country.
Chilli is cultivated in Guntur, Warangal, Khammam, Krishna, Hyderabad, Pundur,
Nizamabad, Cuddapah, Rajahmundry and Nellore districts in Andhra Pradesh; Hubli,
Gadag and Byadgi in Karnataka; and Nashik, Ahmednagar, Sholapur, Aurangabed,
Nanded, Amravati and Lasalgaon in Maharashtra. In Punjan and Haryana, chilli is
cultivated in Amritsar, Nabha, Patiala, Sunam and Samna; in Uttar Pradesh in Bareily
and Khurja; and in Tamil Nadu in Tuticorin and Salem. In India, chilli is being
cultivated mostly as a rain-fed crop therefore its yield fluctuates from year to year
and is generally poor. Recently, its production has been taken up in irrigated areas in
non-traditional states like Punjab and Uttar Pradesh also where the yield has been
better which is likely to boost its output in the coming years.
SEASON
The chill crop does well in the tropical and the sub tropical regions with annual
rainfall of 60-150 cms. Very high rainfall during its growth is harmful. When grown in
the hot weather or in lower-rainfall tracts, it is cultivated as an irrigated crop.
Normally the sowing is done in Sept-Oct and plucking in January. The chilly plant
lasts for one season only. It is plucked 3 to 4 times in the season.
SOIL
The rain-fed crop does well on deep, fertile, well-drained black cotton soils. In illdrained soils, the plants shed their leaves and turn sickly even with temporary waterlogging. Under irrigation and good manuring, excellent crops can be raised in sandy
and light alluvial loams as well as in red loamy soils.
ROTATION
Under rain-fed conditions, the crop is rotated with jowar, ragi, cotton, groundnut and
castor. As an irrigated crop, it is grown in rotation with sugarcane, turmeric, ragi,
maize or with any of the vegetables. Since the pests and diseases are common to
chilli, brinjal and potato it is not advisable to include them in a rotation. The irrigated
chilli crop is sometimes grown mixed with garden crop in northern India, it is
sometimes allowed to grow as a stand-over crop for one or two seasons. The winter
crop is planted from July to September and the summer crop in February and March.
Whereas these are the two important seasons for its cultivation, a third crop, known
as the mid-season (May-June) crop, is also taken in certain parts of the country.
CULTIVATION
The land is ploughed and harrowed 3 or 4 times to obtain a fine tilth. About 100
cartloads of farmyard manure or compost per hectare are applied at the last
ploughing. The land for irrigated chilli is laid out into beds, 2-3 square metres, or is
made into ridges to 1 metre apart. Some farmers also do sheep-penning and pen
about 5,000 sheep per hectare, in addition to the application of manure.
The
production of Chilli for 2006 has wane by 35 to 40 percent because of heavy rainfall.
About 30 to 35 percent of the crop is estimated to damage due to floods in the major
producing regions of South India. The Area under Chilli for 2005-06 has decreased
around 300000- 320000 hectares as compare to in 2004-05. But in the current year
2006-07 it is expected to increase to 8, 40,000 hectares & the production is also
expected to go up about 25% to 30% compared to previous year.
In India, Chillies are grown in almost all the state through the length and breadth of
the country. Andhra Pradesh is the largest producer of Chilli in India contributes
about 27% to the total area under Chilli, followed by Karnataka (19%), Maharashtra
(12%), Orissa (9%), Tamil Nadu (8%) and other states contributing 18 % to the
total area under Chilli.
Andhra Pradesh is the major Chilli producing state in India, the major chilly growing
districts
Khammam,
Krishna and
Prakasham. Guntur is the biggest Chilli market in Asia contributing 30% to the total
production of AP with annual turnover of around 600 crore. Area and Production of
Chilli in this area decides the prices. Production in 2007 is expected to be 15 % in
Karnataka, more than 50% in Andhra Pradesh and old stocks in Guntur estimated to
be around 25 lakh bags, so increased production in major producing states due to
increased acreage and favorable climate may increase the supply in the market.
CHILLI TRADE
Indias chilli exports are currently in bull stage and Chillies exports from India are
mostly to Sri Lanka, USA, Nepal, Mexico and Bangladesh. Among these countries,
USA, Sri Lanka and Mexico are the major importers of Indian Chillies.
EXPORTS SCENARIO
United States of America is the major importer of Chillies from India which
contributes 26% to the total exports from India. Srilanka stands second with 24%
followed by Bangladesh (13%), Malaysia (6%) and others (28%).
EXPORT PERFORMANCE
India exports Chilli in the different processed forms like Chilli powder, dried chillies,
pickled chillies etc and it is mainly exported to USA, Sri Lanka, Bangladesh, the
Middle East and the Far East. There is a lot of voltage in the Indian Chilli exports by
dominating in the international markets and processed chilli can bring big boost to
the prices which can avail to higher exports.
Among the total exports dry chilli contributes a majority of 72% to the total exports
from India, followed by Chilli powder with 27 % and Chilli seed (1%).
WORLD SCENARIO
India is the major exporter in the world market and the total export of chilli from
India is on an average only 4% of total production. Huge fluctuations in Indian
exports are mainly due to increased domestic demand and uneven production
interrupted by erratic monsoon or some time drought. India exports chillies to
maximum countries in the world in which Srilanka and US is the major importer by
contributing 50% to the total Indian exports. Due to proximity and old relationships
were the important reasons for dominance of Indian chillies in Srilanka. China has
emerged as the major exporter in the world market and as a serious competitor in
the International market for India. China is penetrating in to all the major markets
like Indonesia, USA and Japan.
EXPORT TREND
The total export of Chilli from India during 2000-01 was 62447.68 tones valued Rs.
22973.30 lakh which has stood up to 86575.34 tones valued Rs. 36687.34 lakh
during 2003-04. Over the years exports were increasing at the faster rate. During
2004-05 about 138000 tones of Chillies with the value of 49900.00 lakh can be
exported from India. And as compared to 2004-05, export of 2005-06 was decreased
by 113250 worth the value of 403.50. But in the current year 2006-07 it is expected
to grow 25% because of increased production in the country as compared to last
year.
Japan also produces special varieties of Chillies called Bird's Eye, Santaka and
Hontaka types of chillies. But increased domestic demand in Japan hindered the
exports performance of Japan. Imported chillies in western countries consumed in
the food processing industry for its colour and pungency. Where as the countries like
United States of America, the United Kingdom, Germany and Sweden large quantities
of Chilli used in the manufacture of oleoresins and extracts. Apart from India major
producers and exporters of chillies are China, Pakistan, Morocco, Mexico and Turkey.
The chilli crop in China for 2006 is expected to arrive during January and Bangladesh
anticipating better crop this year. But still India has encouraging demand from
Srilanka and other countries mainly because of aroma of Indian Chillies.
FUTURE ESTIMATION
Climatic conditions
The Price Variation in the Chilli also depends on the trade activities like Export,
Import, Domestic demand and crop conditions in major growing countries.
To analyze the domestic price outlook above factor plays important role, these
factors compared with the historical prices which will give us the proper price out
look on Chilli.
The arrival of chilli start in the last week of March in major markets and extends till
May end from Karnataka and Madhya Pradesh. Fresh crop of chilli has started coming
from different origins. Heavy arrival from major chilli growing area i.e. Guntur has
also started. Nearly one-lakh bags are coming at the Guntur market but same
quantity has offloaded from the market.
since Chilli is cultivated under irrigation sources and also in dry conditions, Unlike
peak or low arrivals during harvesting and off-seasons in other commodities, it
continues to arrive throughout year into the markets, because as soon as the
commodity arrives in the market after harvest it will be purchased by the traders
keep the stocks and release into the market as prices move up. Dry Chilli can be
stored for 2 years.
The Average prices during 1985-86 were Rs.1088 per quintal and it has increased to
Rs.3874 per quintal in 2003-04. The average model prices were quoting at Rs. 3101
per quintal in Guntur till December 2005. Over the years prices were increasing due
to heavy export orders and increased domestic demand. In current year 2006-07
because of
As compared to other months March, April, May months are having lower prices due
to heavy arrivals to the markets. Prices are high in the month of June, July,
December and January and till middle of February because of lower availability of
crop. As harvesting starts from January, arrivals starts from January and increases
up to March April and then decreases in May-June, due to closing of market yard (4
weeks in peak summer) during this time farmers are storing their produce in the
surrounding cold storages. During May to August prices of Chilli were at peak levels
because huge demand for dry Chilli from the pickling industry. Most of the pickle
manufacturing companies rush to the market for procuring the chillies. Due to lower
availability during these months only cold storage stocks have to meet the demand.
PRICE TARGET
The prices of chilli mainly depend on the exports and domestic demand. Prices are
expected to come down in near term as a result of higher production estimates.
ESTIMATION
PARTICULARS
QUANTITY
CROP 2006-07
CARRY OVER STOCKS
TOTAL
ANTICIPATED IMPORTS
BALANCE
EXPECTED EXPORTS
DOMESTIC CONSUMPTION
REMAINING BALANCE
10.3 LAKH MT
NIL
10.3 LAKH MT
NIL
FUNDAMENTAL SCENARIO:
Crop harvest in February usually arrive to the market in the mid of February.
Last year stocks in Maharashtra, Madhya Pradesh, Gujarat and other regions
-30%.
is about nil but fresh arrival increase the supply that brings decrease in price.
Arrivals of 70000 bags have been reported in Guntur and spot prices steady in
this market
High spot prices during 2005-06 prompted many farmers to cultivate Chili in
large scale. Prices are expected to come down in near term (Feb 2007) as a
result of higher production estimates.