Cardamom conundrum: Annual demand 8,000 tonnes, daily trade over 1,000 tonnes

The annual demand for cardamom in the country is estimated to be less than 8,000 tonnes, but Chattogram's Khatunganj, the largest wholesale market in the country, is witnessing daily trades of over one thousand tonnes of the spice through a speculative practice known as DO (delivery order) trading, which makes the market unstable and consumers suffer.

"The annual demand for cardamom in the country is at its peak at 7,600 tonnes. However, more than a thousand tonnes of cardamom trading occurs daily in Khathunganj through the DO trading," Amar Kanti Das, senior vice president of the Wholesale Spice Traders Association, told TBS.

DO trading involves buying and selling contracts for future delivery of cardamom without actually taking possession of the spice. Traders engage in the practice of profiting from short-term price fluctuations, often manipulating the market by buying and selling large volumes of contracts. The speculative trading can lead to significant price volatility in the cardamom market, causing uncertainty for both consumers and businesses.

During the process, some traders gamble on delivery slips, even at inflated prices. Their bet hinges on the belief that demand for these slips will remain high, allowing them to resell at a profit. However, if their assumptions falter, they face significant losses. As one trader aptly described to TBS on Saturday, "It's just like gambling."

The price of cardamom has become unstable in Khathunganj due to the increase of DO trades over the last two months. Currently, cardamom is being sold at Tk3,900 per kg, although its import cost ranges between Tk1,200 and 1,500.

According to spice traders, currently in the market, one kg of LMJ (2023-27) cardamom is being sold for Tk3,900, while LMJ (2024-28) is being sold for Tk3,450. However, the products imported from the same supplier (Cardex) are being sold in the capital Dhaka's wholesale market for Tk3,000 (LMJ 23-27) and Tk2,950 (LMJ 24-28). Due to only local trading or exchanging hands between local traders, the same product is being sold in Chittagong's market with a difference of Tk500-900 per kg compared to Dhaka's market.

DO trading blamed for price volatility

Some traders are attributing the price increase to DO trading, in which traders buy and sell contracts for future delivery of the spice without actually taking possession of the spice. This type of trading can lead to price volatility, as traders try to profit from short-term price fluctuations, they say.

DO trading unregulated and risky

DO trading is not regulated by the government and is considered to be a risky practice. Traders who engage in DO trading are not required to have any inventory of cardamom, and they can easily manipulate prices by buying and selling large amounts of contracts. This can lead to sudden price spikes and falls, which can hurt consumers and businesses alike.

How does DO rule Khatunganj market?

Upon visiting Khatunganj on Saturday, TBS found that there was a massive crowd at Sonamia Market. Even if some individuals do not have any products in hand or at their stalls, everyone is engaged in buying and selling goods. The newcomers in the market are primarily engaging in DO sales instead of trading physical products.

Standing in front of Jahanara Enterprise in the market, Ibrahim Hossain said he trades in various consumer goods such as oil, sugar, and cardamom in Khathunganj. Despite dealing in these products for the past three to four years, he does not own any shops or offices. On Saturday, he sold 2 tonnes of cardamom at a price of Tk3,900 per kg, whereas he had bought it at Tk3,700 per kg last Wednesday. As a result, his profit over the last four days amounts to Tk4 lakh.

The trader explained that over the past four days, the price per kg could have decreased by Tk200 instead of increasing. "DO business is somewhat like gambling. Here, the price of goods can fluctuate at times. As a result, the risk of profit or loss is higher."

Another businessman, Raju Saha, mentioned that DO business is prevalent in markets like Sonamia Market, Ajaj Market, Badsha Market, and MJ Market. Most of the time, DO transactions revolve around sugar and edible oil, he said. However, if the prices of sugar and edible oil are low, these businessmen shift their focus to another product to sustain their DO business, said the businessman. "This time they have shifted their focus on cardamom," said Saha

Sekandar Hossain, another businessman, said for spice products, the old and renowned markets in the area are Elias Market and Nabi Market. The majority of spice traders in these two markets import and sell most of the spice products, he said.

However, the traders who are now engaged in DO sales of cardamom, selling hundreds of tonnes of it every day, are not involved in the import of the spice, said Sekandar.

"It's like a form of gambling, where crores of taka worth of goods are sold through DO or slips every day. However, buyers and sellers do not know where these products are coming from. In this DO trade, the price of a product suddenly shoots up to its maximum," he said.

Then those who hold the DO slips often end up facing substantial financial losses, withdrawing from the market with heavy blows, said Sekandar.

Azizul Haque, the proprietor of Haque Trading, a wholesale trader of pulses and spices in Khathunganj, said, "Currently, what's happening with cardamom in Khathunganj doesn't fall under normal business practices. Instead of cardamom, slips are being traded here."

Some unscrupulous individuals, in collusion with certain businessmen, are destabilising the cardamom market by engaging in slip sales, he said.

"By selling these slips, they can pocket large sums of money, leading many to suffer losses. In the past as well, many people have lost their money. It's like gambling," said the trader.

Import costs much less

According to importers, the majority of cardamom imported into the country comes from Guatemala. Among the cardamom imported under brand names like LMJ, Jabis, RS-Jumbo, SMJ, and SBI, there is higher demand in the market for medium-quality Jabisi and LMJ.

Official data shows in the first two months of the current year (until 28 February), 13 establishments imported 237 tonnes of cardamom. The declared price, including taxes, reached Tk1,267 per kg. In 2023, 85 establishments imported 4,677 tonnes of cardamom. The import cost per kg of cardamom, including declared price and taxes, was Tk1,257.

In 2022, 104 establishments recorded importing 6,205 tonnes of cardamom. In 2021, 70 establishments imported 4,395 tonnes, in 2020, 60 establishments imported 3,102 tonnes, and in 2019, 50 establishments imported 3,671 tonnes of cardamom.

Importers and traders said due to decreased cardamom production in Guatemala in 2018, instability arose in the Bangladeshi market regarding the price of the product. At that time, the price per kg of cardamom increased from Tk1,500-2,000 to Tk5,000. In the following two years, importers reduced cardamom imports. Taking advantage of the instability, several businessmen in Khathunganj started investing in cardamom towards 2022. Since then, the import of the product has continued to increase in the domestic market.

Real traders not engage in slip business

Asim Saha, a cardamom importer in Khathunganj, said that genuine cardamom importers and traders are not involved in the slip business. "We import cardamom and sell it in the market. We do not sell slips to anyone." 

He went on to say, "However, a businessman from one of several markets, including Sonamia Market, is destabilising the cardamom market by selling slips. Some of these businessmen might have one tonne of cardamom, but they have sold 100 tonnes of slips in the market. 

"They primarily extract money from the market through slip or paper sales. Later, when a major collapse occurs in the market, these speculative businessmen will be hit hard," he said.

Amar Kanti Das, the proprietor of AB Das & Trading Company, another cardamom importer, said none of the primary spice traders in Khathunganj are involved in DO sales. Those engaging in DO sales of cardamom have never been involved in the spice trade before and are not currently involved in it either, he said. 

"We also want this illegal trade of DO or slip sales to stop because it allows a class of profiteers or opportunists to make money unlawfully, rather than genuine businessmen," he said.

Regulator's role

Mohammad Foyez Ullah, deputy director of the Directorate of National Consumers' Right Protection in the Chittagong Division, told TBS, "We are aware of the current illicit trading involving cardamom. Any form of trading centred on a single product is illegitimate. Previously, we have also observed such illicit trading with oil and sugar. We will promptly launch campaigns in the market to counteract illicit trading."

Leaders of wholesale traders associations in Khatunganj said they frequently raised the issue of DO trading during meetings with the administration, arguing that such speculative trade should be stopped to save consumers and businesses.

Jamal Hossain, organising secretary of the Khatunganj Trade and Industries Association, told TBS, "The illicit DO trading has been prevailing in Khatunganj for a long time, causing instability in the market. Therefore, the administration must take steps to put an end to it."