India’s cardamom traders cheer lower prices with exports set to rise
Last week, the spice fell by Rs15.50 (US$0.25) to Rs658.70 (US$10.76) per kg in futures today as speculators booked profits at existing levels amid weak spot demand.
“[Lower prices mean] there has been an increase in domestic as well as international demand for bolder varieties of cardamom,” says Hemen Ruparel, chief executive of Samex Agency, one of India’s spice majors. “This has opened up a host of opportunities.”
Cardamom is one of India’s most important spice ingredients, with a domestic market of 13,000 to 14,000 tonnes a year. But its use is heavily cost driven, meaning that Indian consumers are prepared to substitute bolder grades with inferior, lower-priced alternatives while using the same amount of pods.
Indians, he says, prefer bolder grades for the feeling, flavour and aroma cardamom can give to traditional cooking. “Consumers associate cardamom with a feeling of richness in food. The bolder grades, which have a higher seed-husk ratio, impart a more intense taste to the product and hence this preference.
“But when prices decline, consumers will go for better quality, rather than reduce costs by continuing with the cheaper kind. This shows that there is a preference for the bolder grades in the domestic market only when the prices are in a tolerable zone.”
Of course, higher demand is pushing rates, and there is now a wide US$7.50 to US$8.00 difference between the lowest and highest grades that Samex sells. Stockists are being instructed to keep prices at this level in order to enjoy continued demand.
Exports pick up
Keeping prices at the attractive and lucrative levels they are now at will have follow-on benefits, not least with exports likely to pick up. Ruparel estimates that India’s exports this year will touch at least 3,500 tonnes, whereas it only shipped around 1,500 tonnes last year despite a record 4,600 tonnes in 2011. The dip came after a poor crop, which in turn resulted in a production shortfall in the country.
However the industry is evidently positive, banking on a good crop this time around, combined with just the right pricing and more awareness overseas, particularly in the Middle East, where it is commonly used in tea.
Buyers there testify that Indian cardamom can be used in smaller quantities than seeds from other producing countries. As a rule of thumb, two bold Indian seeds can be used for every five of Guatemala cardamoms, thus justifying the country’s higher prices over its competitor, which is the worlds biggest exporter of the spice.
“[Consumers] are seeing value in the bolder flavour and the higher oil content,” says Ruparel. India lost out tremendously to Guatemala last year following the failed crop - India’s nearly halved production came at a time when Guatemala produced a record 10,000 tons of the spice. This in turn allowed the Latin American country to export the spice at a substantially lower rate than India was able to do, thus leading to strife among growers and traders.
Leapfrogging the leader
According to an Economic Times report last year, not only did India’s exports lose out to its chief competitor, Guatemala also began pushing its second-grade cardamom onto the Indian market due to a lack of demand in the Gulf. While Guetemala remains the world’s largest producer of cardamom, India is in close second place, and Ruparel estimates this year’s bumper production will help India overtake its rival with 20,000 tonnes.
There are brand new markets too, with new export opportunities for India existing across Scandinavia and the Mediterranean. “In these countries, cardamom is a key ingredient in bread and cakes, and we are seeing them increase their consumption of Indian cardamom.
“Consumers are willing to pay a premium for Indian cardamom knowing that this will actually reduce their costs by imparting higher flavour with fewer pods.”
Much of the recent potential from these new markets comes from innovations in the way cardamom, which is a notoriously bad traveller, can now be exported without losing its boldness in the process. As a result, exporters like Samex have started using scientific packaging that allows the flavour of cardamom to remain intact till it reaches the end user.
But it is all a cycle at the end of the day, although the positive outlook of exports and domestic demand has, according to Ruparel, drawn more growers into the business. “There is certainly more acreage under cardamom due to higher rates. And with good prices being fetched for bolder grades, planters too see sense in putting effort into getting these qualities in their harvest,” he explains.
Increased acreage also buffers India from an ever-present threat – continued rainfall, especially during the current monsoon period. “Even if the rains extend through August, resulting in diseases to sections of the crop and an estimated 10% to 15% reduction in the 20,000 tonnes of production we estimate this year, the industry should have no trouble reaching its targets for domestic distribution and exports,” adds Ruparel.