Demand Outpaces Supply, Driving Turmeric Prices Upward

Turmeric futures have started to climb again in various markets as this year's lower production has led to supply shortages. Traders and industry participants have noted this trend, which is affecting prices significantly. Futures previously peaked at $2,40 per kg and now fluctuate between $2,22 and $2,34. Sunil Patil, proprietor of Varadlaxmi Trading in Sangli, Maharashtra, mentioned a possible $12 movement in prices.

Ankit Agarwal, Director at Amar Agarwal Foods in Erode, observed a rapid increase from $1,92 to $2,40 due to tight supplies but noted caution at the peak prices. RKV Ravishankar, President of the Erode Turmeric Merchants Association, highlighted the volatility due to this season's low crop yield and the upcoming supply scenarios for May.

Current Market Conditions

On Tuesday, polished turmeric closed at $2,28 for June contracts on NCDEX, while August futures ended at $2,35, signaling tight supplies. In Nizamabad, prices were quoted at $2,11, and the superior Rajapore variety at $2,28 in Sangli. The Ministry of Agriculture anticipates a drop in turmeric production to 1.07 million tonnes this year. Down from 1.17 million tonnes, further complicating market dynamics. Agarwal added that the crop might be 30% lower than last year, with farmers withholding an additional 5% for replanting.

Potential Impact of Lower Supply

The reduced supply has already impacted market conditions, and further clarity is expected within the next few weeks. Lower arrivals in Maharashtra, influenced by the Lok Sabha elections, have also played a role, according to Patil. Ravishankar predicted a 25% decrease in demand due to the increased prices. Despite these challenges, Amrutlal Kataria, a trader from Nizamabad, reported that 90% of the crop has arrived, expecting prices to continue rising. Patil and Agarwal suggested that prices might stabilize before potentially reaching $2,64 by the end of May, as transactions are currently being made on a necessity basis.

La Niña and Its Impact on the Turmeric Market

The uncertainty in the turmeric market is heightened by the unpredictable nature of La Niña, which could push prices even higher. Although export demand remains strong, elevated prices have dampened the volume of trade. During the April-January period of 2023-24, turmeric exports fell slightly. It fell to 1.32 million tonnes from 1.36 lakh tonnes the previous year. Although the value increased from $169.81 million to $177.03 million.

The India Meteorological Department's prediction of La Niña's return this year means that the upcoming monsoon will be crucial for next year's crop and price trends. If the monsoon arrives on time and is well distributed, turmeric cultivation could double in key regions. Potentially leading to a drop in prices to between $204 and $216, as suggested by Patil. However, this price adjustment is expected only after July, depending on the market's reaction to the increased cultivation and supply.