Source: Photo clicked in between Patan and Deesa Belt

7th March 2019 INTRODUCTION

Choice Research had conducted Unjha Mandi visit on 28thFebruary-1st March 2019. The objective of the visit was to interact with spot traders, farmers, exporters, physical brokers, millers and agro- industrialists, and to gain an insight on the new Jeera crop scenario. During the survey, we have also gained information regarding the quality of the new crop, daily market arrivals, expected total production (in bags) for the current year and carry forward stocks from the last year. In addition, we have also gained in-depth knowledge on the demand scenario in the domestic and the international markets. Furthermore, we have studied the entire value chain i.e. from the raw Jeera coming to the Unjha Mandi from the farmers and firms till reaching the factory and getting processed. We have also studied various other factors such as profit margins of the firms/millers, commission charged by them to the traders. Correspondingly, we have surveyed regarding the price outlook of various physical participants. Moreover, we have visited some of the farm lands in the nearby regions of , Patan and Banaskata regions of northern . Lastly, along with the above survey, we have also included our In-house outlook on Jeera supported with the Balance sheet, Seasonality trend charts, Spread call for the next month futures and a quarterly technical outlook.

Jeera Auction in Unjha APMC Jeera Auction in Unjha APMC

Jeera APMC Unjha Jeera APMC Unjha VALUE CHAIN

Raw Jeera are transported by the farmers to the firms in AMPC Unjha Mandi from their respective regions of Gujarat and . The goods are sold in Unjha Mandi auction by the firms with the help of AMPC members. Auction is conducted on all six days in the week considering that there is no public/ national holiday falling during the week. First auction starts at 9 am till 1 pm. Multiple auctions are conducted at the same time during the given time frame. Unjha market is also famous for Soaf and Isabgul seeds which are also auctioned during the day.

Second auction resumes at 3:30 pm till late evening depending on the daily arrivals by the farmers in the market. Auction is basically an open outcry where various buyers/traders bid for the lots (1 lot= 20kgs) that they would want to purchase in the market. Buyers/traders generally check the quality of crop by holding fist full of Jeera, comparing it with other stocks available. Checking the moisture content, oil content and weight are also done during the process. Correspondingly, the traders decide the best price for the lot which also includes the amount of cleaning/removing of stones and other materials that is required for the same. There are generally 3 quality types of Jeera sold ranging in different prices in the market.

Export Quality- Current Price for Auction Rs.130-140/kg. NCDEX Quality- Current Price for Auction Rs.140-150/kg Domestic Quality- Current Price for Auction Rs.150-160/kg

Comparing the above 3 qualities, the domestic quality has the highest weight with good moisture content. Quality of NCDEX is average but with lower weight and oil content as compared to domestic quality. Export quality has the lowest weight and lower quality among the three and hence it is traded/bid at a lower price.

Other Jeera qualities that forms a part of auctions are the European and American quality Jeera which are even higher than the domestic quality. Those are basically premium and organic quality of Jeera possessing higher oil content and medicinal value, which are usually less found in Unjha market during the day. Some of the above Jeera qualities come from the higher sowing and yield areas of Gujarat and Rajasthan state, while the rest others are found after cleaning, processing of Jeera in the factories. Based on recent traders survey, Jeera crop coming from Rajasthan have been relatively better in quality and oil content in the past few years. Furthermore, the size of Jeera crop have been higher compared to that of Jeera harvested in Gujarat.

European Quality – Current Price for Auction Rs.160-165/kg American Quality – Current Price for Auction Rs.165-170/kg

The earlier mentioned low export quality are usually exported to Egypt and Bangladesh. China and Japan mostly prefer domestic quality of Jeera while UAE prefers similar quality to the European. In the above left picture, auction of Soaf is being conducted in the same Unjha market while the top right picture is of Isabgul seeds which are kept for daily auctions by farmers/firms.

By the end of the day, Jeera are loaded and send to the respective factories of traders. Mandi Firms charge a standard 1.5% margin on the farmer’s price at which they had brought earlier before auctioning in the Unjha APMC market. In addition, firm charges commission for loading, unloading, transportation of Jeera to the respective trader’s factories or warehouses. Factories are majorly located in the nearby areas of Unjha Mandi where the goods are processed in machine. Processing/ cleaning in the factory are mainly done for removing of dirt/mud, extra fertilizers, pebbles that are usually found in Jeera. Storage of raw material is done in one section of the warehouse and machine clean finished goods are stored in another section of the factory. Storage of finished goods is also done in vacuum weather-free section warehouse for longer life duration. The usual life of Jeera crop is 1.5 to 2 years depending on the kind of storage being made. If the storage is good, crop life can last for 3-4 years. The export quality and NCDEX quality processed Jeera are kept in gunny/jute bags while domestic quality Jeera is packed in plastic bags varying in different size/weight requirement in domestic market. The daily working of the machine is 12 hours in a day and during the peak demand season it runs almost for 24 hours. The cost of processing/machine clean of export quality Jeera is Rs.15/kg while domestic and NCDEX quality Jeera are Rs.18 and Rs.20/kg. The cost of processing /machine clean of European and American quality of Jeera is usually Rs.22 and Rs.25/kg respectively. Some of the traders have their own brand of packaging Jeera in various weights and quality wise. Jeera packaging are generally done in weights of 100 grams to 1 kg. In addition, based on the quality of Jeera, packing is also different for the same. Every trader has a different style and name for packaging based on the quality of Jeera. Below are few names of Jeera brands in top down format based on quality that are sold from Unjha market.

1. Super Bold 2. Bold 3. Super 4. Gold 5. NCDEX 6. Average

Image 1 : Jeera which are brought post the auction are put in the machine for cleaning and processing.

Image 2 : The process of cleaning of Jeera take place which includes removing of stones, pebbles, fertilizers and mud/dust. Four bags are kept below the machine with one removing the mud and dust particles, another one removing the pebbles/stones and fertilizers, third one having the unclean Jeera which still contains the above items in it, while the fourth one the fully processed machine clean Jeera which is ready for delivery or storage in gunny/ jute bags. The third bag having unclean Jeera is once again put inside the machine for another round of cleaning in the same process.

Image 3: The image in the left is the full picture of the machine which is used for cleaning and processing of Jeera.

Image 4 : The image in the left is of the warehouse near the factory machine which is used for storage of raw material and machine clean processed Jeera. Moreover, most traders have connected storage warehouse for extra storage capacity during the peak harvest/supply season. Traders mostly store machine clean processed Jeera in the attached warehouse as it vacuum weather free section.

Image 5 : In the next image, we can clearly see that Jeera is stored in gunny/jute bags which is also moisture free and weather resistant. Furthermore, Jeera is sold in gunny bags in the NCDEX market during the time of delivery. The quality and moisture content specifications of Jeera are different for NCDEX as compared to domestic quality. Some exporters and domestic buyers do buy Jeera in gunny bags which excludes packaging costs.

Image 6 : Based on the bottom left image, generally domestic quality Jeera are stored in plastic packaging bags to be supplied for the wholesalers in various APMCs across .

Below two images are of packing machine and the various packaging brands of Jeera on quality basis.

Jeera Trader & Exporter in Unjha APMC Jeera Trader & Exporter in Unjha APMC KEY FINDINGS

1. Opening Stocks: We are witnessing opening stocks of 3-4 lakh bags (1 bag=55 kgs) for the year 2018-19. It is higher compared to last year 2017-18 opening stocks of 1-2 lakh bags. Earlier during the Jeera crop sowing season (Oct-Nov), opening stocks for the current year(2018-19) had been around 8-10 lakh bags, but then supply of old crop had continued in the major market Unjha which has reduced the current opening stocks to 3-4 lakh bags by the current harvest season. Higher production in 2017-18 as compared to the domestic and export demand has led to the incline in carry forward stocks for 2017-18. Moreover, sowing acreage in Gujarat had made a second peak (after 2013) in the previous year (2017-18) as the Unjha spot price had touched an all time high of above 21000 levels, while in the case of futures market Jeera prices had exceeded 22000 levels. This gave huge boost to the farmers to increase sowing of Jeera in the year 2017-18 eventually leading to higher production in the last year and higher opening stocks for the current year.

2. Acreage: Based on the survey conducted, most of the traders are witnessing 8-10% lower sowing in the state of Gujarat for the current year 2018-19 compared to last year. Current year sowing has been estimated at 3.45-3.50 lakh hectares. Most of the traders have also estimated 2017-18 sowing around 3.8 lakh hectares in Gujarat. Last year’s traders sowing estimate is very much in line with Directorate of Gujarat (DAG) sowing figures. Gujarat sowing in the current year has decreased due to poor rainfall which eventually led to delayed sowing. In the case of Rajasthan, traders are estimating 10% higher sowing from last year. Since, 2018’s monsoon had been relatively better in Rajasthan as compared to Gujarat; Jeera sowing has showcased a better progress in the above state. Moreover, better irrigation facilities in the above state have also supported sowing by the end of 2018. Below are the images of fields that we clicked from the nearby regions of Unjha.

Source: Photo Clicked in between Patan and Deesa Belt

Source: Photo clicked in between Patan and Deesa Belt 3. Yield: Most of the spot traders are estimating an increase in yield of 10-15% compared to last year in Gujarat, while they are estimating Rajasthan’s yield to be higher by 15-20%. The current year’s yield has been estimated at 690kg/hectare while last year has been witnessed at 600kg/hectare. In the case of Rajasthan, traders have estimated current year’s yield to be Rs.500kg/hectare higher compared to 400kg/hectare. This is mainly due to good winter in the state of Gujarat and Rajasthan which has supported the growth of the standing crops. The moisture and oil content of the new crop is also good and there has been no crop damage reported yet.

4. Production: As per the survey conducted spot traders view for 2018-19 total production has been varying in the wide range of 60-80 lakhs. However, most of traders are convinced with 72 lakhs bags as current year production. It is higher compared to 2017-18 production of 68 lakh bags by 5.88%. This is mainly due to higher yield expected in both Gujarat and Rajasthan states.

5. Arrivals: Smaller regions like Rajkot and Gondal had already begun harvesting by first week of February. Average arrivals of 10000 bags (1 bag=55kgs) which includes both old crop and new crop has been brought in Gondal market. However, it is higher compared to last year 2017-18 of 18000- 20000 bags. So far the peak arrivals in Gondal has been around 15000-16000 bags. Since cool weather conditions are still prevailing over Gujarat and Rajasthan, major harvesting is still pending- in the above states. Jeera as crop requires some amount of warmth for the crop to ripe and ready to harvest. Some traders had estimated Gujarat Jeera harvesting to pick up further pace post Mahashivratri, while they are estimating Rajasthan harvesting to pick up post Holi festival. New crop arrivals in Unjha Market begun from Mid- February. In the initial stage new crop arrivals were made in small lots of 1000-2000 bags, while the rest of 5000-6000 where of old crops. Farmers are currently clearing out their old stocks from their warehouses to make space for storage of new crops post the major harvesting.

Week after week arrivals had picked up pace and by the end of February we have witnessed arrivals of 30000-32000 bags on daily basis in Unjha Mandi. However, the current arrivals is lower compared to previous year 2017-18 average arrivals of 40000 bags by 20%. Farmers are also bringing in lower supply due to lower price quoted in the spot and futures market. Prices in spot and futures are currently trading in the range of Rs.15500/quintal to Rs.16000/quintal which has been slightly higher compared to the last year (2017-18), but then, spot price is lower compared to Rs.17000 levels of the preceding year(2016-17). As spot price is most likely increase due to seasonal rise in demand for exports and domestic markets, we are expecting Unjha arrivals to increase to 35000-40000 bags in near term. In the month of April , we can witness higher arrivals of 45000-50000 bags on a daily basis in Unjha markets. Currently supply from Banaskata and Kutch regions of 12000-14000 bags is made in Unjha, while Surendra Nagar regions are supplying 16000- 18000 bags to Unjha market. SUPPLY AND DEMAND OUTLOOK

Supply of new Jeera in Unjha market is currently lower on a yearly basis due to uneven weather conditions which has delayed harvesting. However, with approaching summer season and warmth in some of the regions of Gujarat, harvesting of Jeera crops are expected to pick up pace in the coming weeks. While the major supply from Rajasthan is expected to begin post Holi Festival, the standing crops in Rajasthan has reported well.

Demand on the other hand is steadily rising week after week both from domestic and the international level. Moreover, higher export buying for Jeera from the middle east countries owing to early Ramadan this year compared to previous years, is expected to keep the overall demand for Jeera higher for the short term period. Export demand season which starts from the month of the March month; is expected to peak out by mid April. With average supply of 30000-32000 bags (1 bag=55 kgs) in Unjha, the average demand for bags on a daily basis has been nearly 35000 bags. This is expected to keep the spot price on the higher side for the short term period.

PRICE OUTLOOK

As per the survey conducted most of the traders are expecting the prices of spot and futures market to incline to the level of Rs.17000/quintal in the coming weeks. This is mainly due to seasonal rise in domestic buying and export demand, which can be witnessed at the current Rs.15500-16000 levels. Few other traders are expecting the price to go up till Rs.17500/quintal by mid April before it makes a seasonal fall. The fall can be expected due to owing to overall higher supply and a seasonal downtrend in demand during the month of May. Furthermore, cash crunch in the domestic markets can also be witnessed due to upcoming general elections which could reduce buying in the domestic markets. Farmers coming in the Unjha Mandi still want payments in cash; refusing cheques or any electronic means of payment. Since most of the farmers live in remote areas where there are no banks, payments in the form of cash is more convenient for their survival, loan repayments, cost of pesticides and labour wages.

Please check the next slide for In-House Fundamental Outlook and Technical Outlook.

IN-HOUSE FUNDAMENTAL OUTLOOK

BALANCE SHEET Balance Sheet (in tons) Atributtes 2016-17 2017-18 2018-19 E % Change Beginning Stocks 10435 7403 48840 560% Production 460000 540000 550000 2% Imports 4007 4500 5000 11% Total Supply 474443 551903 603840 9% Domestic Consumption 340000 350000 370000 6% Exports 127040 153063 180000 18% Ending Stocks 7403 48840 53840 10% Total Demand 467040 503063 550000 9% Stock to Usage % 2% 10% 10% Crop year - Oct to Sept Source: Choice Research,State Agriculture of Gujarat and Rajasthan & Department of Commerce

1. Beginning Stocks : Choice Research is estimating beginning stocks of 48840 tonnes for the current year 2018-19. It is higher by 560% compared to 7403 tonnes of the previous year due to bumper Jeera crop production witnessed during the year 2017-18 as compared to 2016- 17.

2. Production : Production of the current year is reported at 55000 tonnes, higher by 2% compared to 540000 tonnes. Lower and delayed sowing in Gujarat by 8% and higher sowing in Rajasthan by 10% has given a round off higher sowing of 2% for the current year as compared to the previous year. Sowing had delayed in the state of Gujarat due to poor monsoon witnessed in the year 2018. Moreover, improper irrigation facilities from regions to various other regions of Gujarat has reduced the overall sowing. On the other hand, Rajasthan has received relatively good amount of rains as compared to Gujarat and has better irrigation facilities which had supported sowing by the end of the year. However, favorable winter season has also supported growth of the standing crops in the above states eventually increasing total production.

3. Imports : Estimated lower production in Gujarat has increased the imports of Jeera to some extend in India. The major import destination for India has been Syria and India imports approx. 87% of the total imports from Syria. As per Department of Commerce, imports of Jeera for 2017-18 has been at 4500 tonnes., higher compared to 4007 tonnes of the previous year. In the current year, we may witness small incline to 5000 tonnes, higher by 11% from previous year owing to rising consumption in the domestic markets.

4. Domestic Consumption : With rising population in our country consumption of Jeera is expected to increase for the current year as well. For the year 2018-19, we are considering domestic consumption to increase by 6% from last year to 370000 tonnes, due to expectancy of overall lower prices for the current year as compared to previous year. Prices are estimated to remain lower owing to higher production and closing stocks for the current year.

5. Exports : Demand for India Jeera by global buyers is estimated to showcase further incline for the current year as compared to 2017-18. This is majorly due to ongoing geopolitical tensions in Syria and Turkey which is forecasted to reduce sowing and production in the said countries. Also quality of Indian Jeera is relatively better as compared to the above countries which is forecasted to increase the overall exports. In addition, overall trend in rupee is still in the weaker zone, which could also boost exports to the global buyers. As per Department of Commerce, last year’s exports have been at 153063 tonnes, higher compared to 127040 tonnes. For the current year(2018-19), we are estimating exports to further increase to 180000 tonnes, up by 20% compared to the previous year.

6. Ending Stocks : Since the overall supply is forecasted to exceed the markets based on the above table, we can expect higher carry forward stocks for the current year as compared to the previous year. We are estimating ending stocks for the year 2018-19 to be at 53840 tonnes, higher by 10% compared to 48840 tonnes of 2017-18. In addition, the stock to usage ratio of 10% is similar compared to the previous year, but it higher compared to previous 3 year’s average of 5%. Overall looking at the demand and supply scenario, we can come to a conclusion that the spot and future prices are estimated to remain the lower side before the start of the next sowing period. SEASONALITY TREND

The above chart gives a clear seasonality trend of Average Jeera spot price in the last 5 years. It clearly showcases that the average spot price have majorly declined in the months of February and March owing to harvest season and supply pressure. Post the month of March, we can see an incline in spot price owing to seasonal rise in demand in the domestic and international markets with a small correction in between May and June months. Price have made a first peak by the end of August due to peak export demand from India after witnessing crop and production scenario in Turkey and Syria respectively. However, prices begin to decline once again in September month till Mid- October due to off season and pre sowing season. Post October spot price has further inclined based on sowing updates, weather conditions and carry forward stocks for the next year.

The seasonality trend in the last couple of years shows an inclining trend; especially in the month of April with increased demand for Jeera as compared to supply in the spot markets. Post the April month, spot price has majorly declined in the month of May owing to seasonal downtrend in the domestic and export demand. By the month of June, spot price of Jeera has majorly come back to near equilibrium levels or has slightly inclined due to return of export demand for the global buyers. The overall seasonality trend in the past few years has been in the range of -10% to +10%. For the year 2019, we are estimating similar trend to 2017 as delayed new crop arrivals and higher domestic and export demand is expected to keep the spot and future prices higher for the near term. SPREAD OUTLOOK

The above chart depicts the Calendar Spread of Jeera May-April Futures, which has majorly traded in Contango in the past couple of years starting from month of January till the expiry date of April. The trend range has been majorly between Rs. 150-350 levels. However, in the case of recent year 2019, we can see the spread trading from Rs.1765 levels to Rs.150-200 levels till 5th March. This is majorly due to discounted price trend in the April Futures in the past few months owing to expectancy of higher production of Jeera for the current year 2019 as compared to previous year. During the coming weeks, we can expect the above Spread to narrow down further to Rs.50-100 levels due to expectancy of increased volumes and open interest in May Futures. We would recommend Selling May futures and Buying April futures in the spread range of Rs.250-300 levels for a target of Rs.50-100 levels, keeping a stop Loss at Rs.400 for the next two months. TECHNICAL OUTLOOK

On a weekly chart, NCDEX Jeera (Apr) price has reversed back after taking a support of Rising Trend line, which suggests an bounce back in the counter. On the daily chart, Positive divergence is seen in the RSI as the momentum indicator made higher lows against lower through in prices, which indicate positive strength in the prices. However, Price has sustained below “Ichimoku Cloud”, which reinforce bearish signals for near term. Furthermore, price has been trading below Parabolic SAR, which is a bearish reversal pattern and witness of downward trend. On the other hand, a momentum indicator RSI and MACD has shown negative crossover on a weekly chart; which adds more bearishness to the price. In addition, price has sustained below 200 SMA; which intimate medium term trend remains bearish. For short term perspective, one can initiate a long position around Rs.15000-14900 with the stop loss of Rs.14400 for the target of Rs.16100; or on the other side, if price moves upward from the current levels then traders can use sell on rise strategy from Rs.16100-16200 levels with the stop loss of Rs.16700 for the downside target of Rs.15000. Overall; we recommend sideways view in NCDEX Jeera (April) for the month. Contact Us