1 spices of fortune all india spices conference 7 th oct 2006, bangalore a presentation by the...

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Spices Of FortuneAll India Spices Conference

7th Oct 2006, Bangalore

www.investsmartindia.com

A presentation by the IL&FS Commodities Division

Chillies

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6500/qtl !!!

@

Chillies

www.investsmartindia.com

A presentation by the IL&FS Commodities Division

Who has stolen my chillies ?

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Agenda of the presentation

1. Overview

2. Supply-n-Demand

3. Challenges Ahead

4. Chilli on Exchange

5. Exchange Advantages

6. Price Outlook

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Agenda

India

Major Producer, consumer & exporter in the world

Chilli accounts for 20-30% of total Indian spices exports valuing approx 400-500 crore

Practically all the states in India grows chilli resulting in arrivals round the year.

Andhra Pradesh is a leading producer of commercial grade of chilli

Overview

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Agenda Indian Supply –n-Demand

State Wise contribution of Chilli

27%

19%5%12%

9%

2%

8%

18%AP

Karnataka

MP

Maharashtra

Orissa

UP

TN

Others

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Agenda

Global

India contributes for around 25% of world chilli production

Other major producer are China, Pakistan, Morocco, Mexico, Spain and Turkey

Chilli contributes for 22% of world spices trade in terms of volume.

Globally China is emerging as major threat for India

Asian countries consumes chillies directly while USA and EU imports mainly for its oleoresin requirement

Overview

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Agenda Overview

World Spices Export (%)

Ginger4%

Turmeric5%

Tree Spices14%

Seed Spices17%

Chilli22%

Cardamom3%

Vanilla1%

Pepper34%

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Agenda of the presentation

1. Overview

2. Supply-N-Demand

3. Challenges Ahead

4. Chilli on Exchange

5. Exchange Advantages

6. Price Outlook

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Acreage and Production

Agenda Supply – N- Demand

Year Area Production

2001-02 8.8 10.6

2002-03 8.5 8.8

2003-04 9.9 11.0

2004-05 E 9.5 10.0

2005-06 E 9.5 10-10.5

Acreage and Production of Chilli

0

2

4

6

8

10

12

2001-02 2002-03 2003-04 2004-05 E 2005-06 E

Area

Production

Stagnant or Declining Acreage and Production

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Exports

Share of Chilli in Indian spices export is around 20-40% in volumes

India export its chilli mainly to Srilanka, Bangladesh, Korea, Malaysia,Singapore, Japan, UK, Germany, France and USA

Agenda Supply – N- Demand

Nepal3%

Others28%

Usa26%

Sri Lanka24%

Bangladesh13%

Malaysia6%

Share of major items in Indian spices export(Qty)

Chilli42%

Pepper4%

Cumin4%

oils & oleoresin3%

Mint product2%Turmeric

13%

Curry powder2%

Coriander10%

Other seeds11%

Other Spices6%

Ginger3%

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Exports - India

Agenda Supply – N- Demand

Year Quantity

(tons)

Value (Rs. Lakh)

1999-00 63,591 25471.55

2000-01 62,448 22973.30

2001-02 69,998 25244.02

2002-03 81,022 31514.68

2003-04 86,575 36687.81

2004-05 E 138000 49900.50

2005-06 E 113250 40350.00

Export -Volume and Value

020,00040,00060,00080,000

100,000120,000140,000160,000

0

10000

20000

30000

40000

50000

60000Qnty (tons)

Value (Rs. Lakh)

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Exports

Agenda Supply – N- Demand

Country wise Percentage share of exports

• India (25%)

• China (24%)

• Spain (17%)

• Mexico (8%)

• Pakistan (7.2%)

• Morocco (7%)

• Turkey (4.5%)

India26%

China26%Pakistan

8%

Morocco 8%

Turkey5%

Spain 18%

Mexico9%

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Balance Sheet 2005-06

Agenda Supply – N- Demand

Sheet2005-06

(Lakh Tonne)

Beginning Stock 1.1

Production 10

Total Supply 11.1

Exports 1.0

Domestic Consumption 10.1

Total Demand10.0

Price Sensitive

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Agenda of the presentation

1. Overview

2. Supply-n-Demand

3. Challenges Ahead

4. Chilli on Exchange

5. Exchange Advantages

6. Price Outlook

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• Adverse climatic conditions

- Floods, drought, unseasonal rains etc

• Increasing consumption

- Growing population need

• Emerging competitors

- China – Future threat to Indian exports

• Lack of sufficient carry over stocks

- Due to increase in consumption

• Malpractices and Speculation

- On the basis of growing opportunities

• Numerous varieties within same region

Agenda Challenges Ahead

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Agenda of the presentation

1. Overview

2. Supply-n-Demand

3. Challenges Ahead

4. Chilli on Exchange

5. Exchange Advantages

6. Price Outlook

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• Chilli first got remarkable participation on NCDEX futures exchange

• Sanam best Guntur delivered was the first contract launched but

was withdrawn on operational issues

• LCA 335 variety contract introduced - March expiry & onwards

• Contract trading lot is of 5MT (1 Re change = Rs.50)

• Margin requirement = 15-25% (Case dependent)

• Contract is of 3 months expiry

• Client wise limit is applicable and is 5000 MT (Near month 1000 MT

only)

Agenda Chilli on Exchange

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Agenda Chilli on Exchange

Contract months

Average Volume (MT)

Average Open

Interest

Average Traded Value (Rs. In lacs)

March 3431.42 5756.78 1114.29

April 4838.11 5905.5 1778.9

June 4686.9 6445.1 2313.9

July 4059.7 6245.9 2056.1

Aug 5075.6 8906.9 2599.3

Sep 5430.6 6467.1 2961.4

Oct (4 oct) 9640.8 9951.7 5851.7

Nov (4 Oct) 4372.4 5336.4 2765.9

Dec (4 oct) 4355.7 9016.3 2801.4

NCDEX Chilli – Average Volume, OI,

Value

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Agenda Chilli on Exchange

ExpiryMon

thQty(MT)

Settlement prices/tonnes

Total Value lakhs

April 10 36020 3.6

June 885 44630 394.97

July 2690 48390 1301.69

Aug 1690 54810 926.28

Sep 2340 517701211.41

Exchange Deliveries & Settlement

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Agenda of the presentation

1. Overview

2. Supply-n-Demand

3. Challenges Ahead

4. Chilli on Exchange

5. Exchange Advantages

6. Price Outlook

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Price discovery

India’s branding on world trade

Hedge availability to corporates and individual traders

Arbitrage opportunities – Investment demand

Directional trades or speculation

Jobbing and Punting

Agenda Exchange Advantage

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Agenda of the presentation

1. Overview

2. Supply-n-Demand

3. Challenges Ahead

4. Chilli on Exchange

5. Exchange Advantages

6. Price Outlook

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Forecasting model

• Fundamental Analysis- SND, Policies, Weather situation etc

• Derivative Analysis- Study of volume, Open Interest and Spreads

• Technical Analysis- Chart based study and forecasting of prices

Agenda Price Outlook

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Agenda Price Outlook

Technical Analysis

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Agenda Price Outlook

Weekly

6600.00

6400.00

6200.00

6000.00

5800.00

5600.00

5400.00

5200.00

5000.00

4800.00

4600.00

4400.00

4200.00

4000.00

3800.00

3600.00

3400.00

3200.00

3000.00

Resistance acting as support

100

61.8

50

38.2

0

40.3°

Chilli LCA 334 NCDEX=5805.00 trend retrace label2

Sep 1, 2006May 1, 2006Jan 1, 2006

•Primary trendline intact with support taken recently at 5600.

•Corroborative evidence of bullishness from the fact that the levels of 5600 - 5800 acted as a strong resistance during early days of May 2006 and has changed from. resistance to support, preventing further decline.

• Second rally started in August from 4600, making a top of 6600. The 50% Fibonacci retracement of this rally reckons to 5600, which exactly coincides, with our support level.

•The bull market is in place and the required correction has also come to an end. Any advance above 6100 levels should be considered as a buying opportunity for medium and long-term investors.

•However intermediate consolidation phase cannot be ignored if it remains below 6100 in the near future. However the probability of prices resuming the uptrend is high.

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Agenda Price Outlook

Trading Strategy

Buy December Contract on Dips of around 6000

Medium to longer term Target – 6700 -7000

Exit or play short trades on breakout below 6000 - Dec Contract

Six Month Range = 5500-7500

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Thank You !

www.investsmartindia.com

IL&FS Investsmart Commodities Limited

K.N.Rahaman

Manager – Commodities Research

022-67160 851-56