Nutmeg is the new rubber: Price drop upsets Kerala growers

KOCHI: Good production and slack demand have pulled down nutmeg prices, dashing hopes of growers in Kerala who were banking on this spice to boost their income at a time when prices of natural rubber, the staple plantation crop of the state, are yet to rebound to earlier levels.

Exports of nutmeg, a popular seasoning used in sweet and meat dishes worldwide, rose 25% year-on-year in 201617 to 5,070 tonnes in volume and Rs 236.41 crore in value, thanks to a shortfall in Indonesia, which pushed up its prices in global markets.

China was among the biggest buyers of Indian nutmeg last year. "This time, the demand for our nutmeg has fallen with price at $7,200 per tonne, around $500 higher than that of Indonesia. China is sourcing more from Indonesia," said Deepak Parikh, partner at Kanu Krishna Corporation, a major exporter.

A dip in overseas demand and lower support from the domestic market have pushed down nutmeg prices. The average price has dropped to Rs 350 per kg from Rs 500 last year.A few years ago, nutmeg prices had zoomed to Rs 1,000 per kg on the back of a global shortage. Growers say a price of Rs 350 per kg does not cover the cost of production.


"Introduction of GST seems to have dried up the demand for the spice from north India," said KV Biju, a Keralabased grower. Usually, the north Indian demand picks up with the onset of the festival season. "At first, there was confusion about the GST rate on nutmeg. So, the traders were not willing to make purchases. But that has been clarified and the tax rate is 5%. Now, there is another issue, as traders and exporters are not getting the input tax credit," Biju said.

Kerala accounts for half of India's nutmeg production, which is estimated to be around 14,000 tonnes. Tamil Nadu and Karnataka are the other major producers. Belying earlier fears of weather factors affecting production, the harvest was good in Kerala where growers had turned to nutmeg with rubber prices Rs 150 per kg falling below.

"Lot of nutmeg is getting smuggled from Kerala. If the authorities concerned can check the trend and enforce the payment of GST, the prices may rise," said Sabu Joseph, partner at exporter Ann Impex House of Spices.