After Edible Oil, Cumin Turns Hot with Prices Set To Touch a 5-Year High: CRISIL

Moneylife Digital Team 03 May 2022

Investor Interest

Cumin, an unassuming item of the Indian spice box, appears set to take centre stage as a sharp decline in production in crop season 2021-22 (November-May) drives up its prices to a five-year high, says a research note.

In the report, CRISIL Ratings says, "Cumin acreage fell an estimated 21% on-year to about 9.83 lakh hectare during rabi season 2021-2022. Acreage likely declined 22% on-year in Gujarat and 20% on-year in Rajasthan. As if that was not enough, adverse climatic conditions in the two states deterred proper seed filling, resulting in an estimated yield decline of about 20% in Gujarat and around 15% on-year in Rajasthan. Thus, total cumin output is estimated to have declined 35% on-year to 5,580 lakh tonnes in 2022."

For the record, cumin is the second-most popular spice in the world after black pepper.

Apart from its significance in adding flavour to our cuisines, the spice has been used as a gift to brides and even used to pay taxes, going by folklore. A crop native to Egypt's Nile Valley and the Eastern Mediterranean, it is now largely produced in four countries—India, Syria, Turkey and the United Arab Emirates (UAE). Today, India accounts for about 70% of the world's cumin production and is also the largest exporter with 30%-35% of its production. A shortfall in the country's output is, therefore, bound to send up prices globally, too.

Describing the reasons for the sharp fall in cumin production, CRISIL says, there is a shift to mustard and gram production. During the cumin sowing period (October-December 2021), mustard prices jumped 43% to Rs74 per kg and gram prices increased about 35%, making these more attractive than cumin.

"Cumin prices have been falling since 2018. In fact, prices plummeted in 2020 and 2021 (up to August). This, too, deterred farmers from taking up the cumin crop," it added.

Cumin is also sensitive to water and excess moisture in soil leads to diseases such as wilt. Excess rainfall in the key cumin belts of Dwarka, Banaskantha and Kutch in Gujarat, and Jodhpur and Nagaur in Rajasthan increased the probability of wilt attack, preventing farmers from sowing the crop.

While the domestic production of cumin is down, exports in FY21-22 also declined. After trending up between fiscals 2018 and 2021, cumin exports declined about 24% in fiscal 2022 (April 2021-February 2022), due to 51% drop in exports to China, which accounts for one-third of exports, following a pesticide residue issue in Indian consignments.

"Given that production has likely declined by a significant about 35%, exports too are expected to fall this fiscal. That apart, India does benefit from the fact that the crop harvesting calendar varies across cumin cultivating countries. In India, cumin is grown as a rabi crop — sown during October to December and harvested between February and April. It is able to fill the void created by other countries’ lean season," the rating agency says.

With the shortfall in supply, cumin prices are expected to soar this year. Unjha mandi in Gujarat, which accounts for about 40% of India’s cumin arrivals, witnessed a 60% decline in arrivals in March 2022.

According to CRISIL, while arrivals for 1st April to 23 April 2022 show around 38% increase, it is on a low base of last year where there were no arrivals in the second half of April amid the pandemic. Consequently, prices in the mandi jumped 47% and 72% in March and till 23rd April, respectively.

"Prices in Unjha mandi have been increasing from Rs180 per kg levels in March to about Rs215 per kg this month," it added.

According to the rating agency, fall in exports will put pressure on global price as well. Short supply from India, higher prices in Turkey and estimated lower production in Syria will support the bullish trend. As on 23 April 2022, cumin prices in the international markets were up about 50% year-on-year (y-o-y) at 2.34 Euro per kg, on average.

CRISIL estimates cumin prices to shoot up 30%-35% y-o-y to touch a five-year high of Rs165-Rs170 per kg in rabi season 2021-2022. Cumin farmers, therefore, are set to reap lucrative realisations this year, it added.

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