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 NCDEXs 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 PEPPER R APRIL APRIL2004 2004 TURMERIC TURMERIC JULY JULY2004 2004 JEERA JEERA FEBRURY FEBRURY 2005 2005 CHILLI CHILLI MARCH MARCH 2005 2005 CORIANDER CORIANDER AUGUST AUGUST 2008 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. agent for culinary purposes and form an important ingredient All spices are used as a 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.

EXPORTS S FROM I NDIA (A APR-JUN 2011) TO ONNES CHILLI - 40,50 00 ERIC - 21, 775 TURME CORIAN NDER - 7,500 CUM MIN - 5,75 50 PEPP PER - 5,75 50

SPICE UP YOUR INVESTMENT PORTFOLIO

Top Performing Spices

50 40 30 20 10 0

Returns in Jan-July 2011 (%): Near Month Futures

Best Performing Long

Best Performing Short

Coriander

Turmeric

SPICES FUTURES AS A TOOL TO MANAGE PRICE RISK

24 21 18 15 12 9 6 3 0

PRICE VOLATILITY

May-09

May-10

May-11
CHILLI

Jan-09

Mar-09

Jan-10

Mar-10

Jan-11

Mar-11

Jul-09

Sep-09

Nov-09

Jul-10

Sep-10

Nov-10

DHANIYA

PEPPER

TURMERIC

JEERA

Source: NCDEX (Monthly volatility calculated on the basis of spot prices of base centre

KNOWLEDGE EDGE
Plantation- Harvest Calendar: India
Spices
RED CHILLI CORIANDER JEERA PEPPER TURMERIC
Harvest Planting Flowering

Jan

Feb

Mar

Apr

May June July

Aug

Sep

Oct

Jul-11

Nov

Dec

The Plantation - Harvest Season may changed due to change in climatic conditions.

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

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 ve years. Jeera or cumin seed has signi cant 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, JulySeptember 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 Ticker Symbol Unit of Trading Delivery Unit Quotation Base Value Tick Size Maximum Order Size Basis Centre Additional Delivery Centres CHILLI CHLL334GTR 5 MT 5 MT `/quintal* Re. 2 250 MT Guntur Warangal CORIANDER DHANIYA 10 MT 10 MT `/quintal* Re. 1 500 MT Kota Ramganj Mandi, Jaipur, Guna, Baran Badami 7500 (1500) 2500 (500) Compulsory Delivery JEERA JEERAUNJHA 3 MT 3 MT `/quintal* Re. 1 150 MT Unjha Delhi, Jaipur, Jodhpur Machine Clean Jeera 3000 (600) 1000 (200) Compulsory Delivery PEPPER PPRMLGKOC 1 MT 1 MT `/quintal* Re. 1 50 MT Kochi Calicut, Trissur Malabar Garbled- 1 4500 (900) 1500 (300) Compulsory Delivery (Early Delivery) TURMERIC TMCFGRNZM 5 MT 5 MT `/quintal* Re. 2 250 MT Nizamabad Erode, Sangli, Warangal, Duggirala, Cuddapah Unpolished Finger 20000 (4000) 5000 (1000) Compulsory Delivery

Grade
Members Position Limit (MT) Clients Position Limit (MT)

LCA 334 All Contracts Near Month All Contracts Near Month 12500 (2500) 4000 (800) Compulsory Delivery

Delivery Logic

Compulsory delivery of contracts implies that all open position at the expiry of contract need to be settled
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(* : quintal=100 Kgs)

www.ncdex.com.

MAJOR AREAS OF SPICES PRODUCTION

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 nds 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 pro t of `10,000.

Speculation
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 di erence is called 'spread' in trade terminology. Due to some uctuation 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 o his position in both the contract and realises the pro t of ` 1,500.

Ms. Mirchi has through understanding of the fundamentals of chilli trade and keeps a continuous track of domestic and internationall developments that a ect 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 o her position and locks in the profits.

Contact our Business Team (Spices) for any query/information:

SRIKANT AMBATI (HYDERABAD) + 919951922000 JITENDRA SINGH (JAIPUR) +919983325699 SREEKANTH CHETTIYAR (KOCHIN) +919946761411 ANIL JAISWAL (AHMEDABAD) +919898066934 DEEPAK SAYANA (HYDERABAD) +919848220310 GAURAV MIDDHA (DELHI) +919711159060 AMIT DARAK (MUMBAI) +919819179128
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ANUP RAJ (DELHI) +919958110086 VIKRAM SINGH (KOLKATA) +919051454777 SANDEEP DUBEY (HYDERABAD) +919949152475 BHARAT JAKATI (MUMBAI) +919833255348 TARUN KATOCH (INDORE) +919754417054 T. UMESH (JAIPUR) +918239101000