Strife Sends Cumin to the Fore in India; Speculators and Indian Farmers Are Attracted to Profits From the Yellow-Brown Spice

Strife Sends Cumin to the Fore in India

Speculators and Indian Farmers Are Attracted to Profits From the Yellow-Brown Spice

BIMAN MUKHERJI

Jan. 21, 2014 7:35 p.m. ET

VANOD, India—Traders and Indian farmers alike are reaping an unlikely windfall from unrest in Syria: a booming cumin market. Syria was India’s biggest rival in exports of the yellow-brown spice, which is a crucial ingredient in Middle Eastern, Asian and Mediterranean cuisines and adds a dash of flavor for kitchens in the West. But the truckloads of cumin that once regularly left Syria for the Mideast spice hub of Dubai have slowed to a trickle since the Syrian conflict began in March 2011.Indian farmers stepped in to fill the gap, a decision that has been increasingly profitable and has sparked an upsurge of interest among investors.

“Betting on cumin has paid off,” said Sureshbhai Patel, a 36-year-old farmer from the village of Vanod on the flat, dry planes of the western state of Gujarat. “It’s a hard crop to maintain. But the weather has been right, and I’ve made twice what I would’ve on cotton.”

Mr. Patel bought a new tractor with his spice dividends over the past year and plans to purchase a greenhouse for growing vegetables and flowers with his savings.

Cumin’s price has been volatile because of the Syrian conflict. In the past three years, the price has ranged as high as $1.93 a pound, up 28% from before the conflict, and settled recently at $1.48 on expectations of a record Indian crop this year. The large price swings have drawn in traders looking to capitalize on the next move.

India’s cumin-futures market, launched in 2005 by National Commodity & Derivatives Exchange Ltd., is frequented by food companies hedging their exposure to the spice but increasingly is used by traders betting on price trends. More than half of the activity is likely led by such speculators, commodity brokers say, and some futures contracts on Indian exchanges were scrapped last year in a bid to tamp down speculative trading, which typically increases with the start of sowing in November and December. Open interest was 6,576 metric tons at the Jan. 16 close for the March cumin-futures contract on the NCDEX.

“Traditionally, the interest in cumin was from people who would put it in a grinding machine or a bottle, but we have seen an increase in the people who want to use it as a trading asset,” said Pete Saiya, vice president of U.S.-based spice brokerage A.A. Sayia & Co., which provides market prices and forecasts to the Spices Board of India, a government agency.

“Prices are likely to remain stable until April, as fresh supplies would come in from the new crop,” said Arvindbhai Patel, an investor and trader in cumin based out of Gujarat’s Unjha market who says he expects to buy cumin—both the spice itself and futures—in coming months. “We are likely to see an uptrend in prices after April because of the good demand.”

India for several years has been the world’s biggest producer, consumer and exporter of cumin, which has been used to add flavor to food and as medicine for millennia. It is mentioned in the Old Testament and was even used in preserving corpses as mummies in ancient Egypt.

Mr. Saiya estimated the total global production of cumin at around 400,000 metric tons annually, valued at about $1 billion. India is expected to account for about 350,000 metric tons of the total output this year.

Syria used to export about 20,000 metric tons of cumin in most years and more than 30,000 tons in some years with a bumper crop.

As spice traders moved to fill the gap left by Syria, India’s exports of cumin surged 93% between last April, the start of the fiscal year, and September, to 67,500 tons, according to the Spices Board of India. This is bringing bumper profits to farmers in the semiarid states of Rajasthan and Gujarat, where cumin thrives.

Most farmers would usually allot only a small corner of their fields for the hard-to-raise cumin plants for their own consumption. The dark green plants—which are planted in November in India and bloom with white flowers to produce seeds by February—are notoriously unpredictable. Wide swings in temperatures, too much dew and unseasonal rains all can ruin a crop.

Still, higher profits and expanding demand have convinced more farmers here to switch from their traditional crops of cotton and mustard seed to grow more cumin. As of Jan. 13, the acreage of cumin fields in Gujarat, which accounts for 75% to 80% of India’s cumin crop, was up 36% from a year earlier to 1.12 million acres, according to the Gujarat agriculture department.

“Never before have I seen exports this robust,” said Gourang Patel, chairman of the Agriculture Produce Marketing Committee in Unjha, a small town in Gujarat that is the hub of India’s cumin trade.

Of course, the good times can’t last forever, traders said. If the Syrian conflict subsides, Syrian exports could flood the market within a year. Also, there have been some rains in producing regions this week that may cause slight crop damage.

Farmers in Gujarat said they are going to cash in while they can.

Kanubhai Rathore, 52, a farmer in the village of Saveda, has 20 acres of cumin planted this year. He plans to use the money he earns to build a small inn near a lake in his village.

“Traders are already inquiring about our crop,” he said, sitting on a wooden cot, one of the few pieces of furniture in his home. “I have heard all this interest in cumin is because there is something going on in Syria.”