Turmeric prices have been moving within a long term channel beginning from Oct'11 ranging between Rs3,470-5,760. The price action since Apr'12, wherein prices attempted to form a base, holding the low of Rs3,520 and last week's upside breakout essentially indicates that prices have triggered a rally. Similar kind of price pattern occurred during July-Nov'08 and prices began to rally from Rs3,200 levels making a peak at Rs15,635. Technically, the breakout above Rs4,150 stands valid and initial resistance is placed at Rs5,165, break above which prices could target Rs6,300-64,50 in the medium term. As long as prices are holding Rs4,150, positive outlook stands intact. On the fundamental front, considering the sharp fall in turmeric prices last year, the inclination for rise in acreage shall be lower as farmers might find it worthwhile to shift to other alternative lucrative crops such as soybeans (as is happening in AP). Standing today, acreage could drop by 25-30% yoy, and production could be far lower from 81 lakh bags last year and 70 lakh bags in the previous year. Further more, with major world weather agencies such as IRI Columbia and CPC (Climate Prediction Center) US predicting an El Nino event during August (which could result in extreme dryness), most likely turmeric plantings would miss the deadline planting date, leading to disturbed crop development. Hence, there is room for lots of weather risk price premiums being built into the prices, moving forward. It may be noted that, erratic / below normal monsoon has led to jump in all agri-commodity prices such as Jeera, oilseeds, Chana and turmeric is not an exception.
Positional strategy – BUY
Can initiate long position upon in the range of Rs4,780-4,880 with an initial target of Rs5,250 followed by a potential target Rs5,650. Overall stop loss can be kept below Rs4,220.
Failure to sustain above Rs5,200 could invite a mixed tone within the range of Rs4,650-5,150 and price could enter into a prolonged consolidation.
NCDEX TURMERIC AUG’12 FUTURES – Rs/Qntl
Source: Metastock, India Infoline Research
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