G. K. Nair

Kochi, June 26
The pepper market has been witnessing a “tug of war” between the bull and bear operators. It has been highly volatile and the weekend witnessed the bearish efforts. “In fact, one could see bear operators becoming bull operators and vice-versa in this market,” market sources told Business Line.

“The graphs and charts of experts have changed route now. These operators were keeping the market suppressed and now it has boomeranged as there is a real tight supply scenario,” they said. The market started realising that there is supply constraints in all the origins as the availability has not increased corresponding to the current demand. Many who were buying hand to mouth waiting for new crop to arrive in one origin or the other have no other alternative now but to buy at the current rates, they said.

Add to this, there is strong domestic demand as the South-West monsoon is advancing to the north Indian States. Those who were buying small quantities and delayed buying also started covering now at higher prices, they said. All the contracts shot up during the week substantially to close much above the previous close.

Buying at sellers prices
July, August and September contracts increased by Rs1,408, Rs1,417 and Rs1,412 respectively to close at Rs17,850, Rs18,050 and Rs18,235 a quintal. Total turn over increased by 34,976 tonnes to close at 73,882 tonnes. Total open interest increased by 1,750 to 15,752 tonnes. Spot prices during the week soared by Rs 1,200 to close at Rs 17,000 (ungarbled) and Rs 17,500 (MG 1) a quintal. In fact, stockists/bullish operators based in north India were buying at sellers prices.

Many of them are anticipating that the domestic demand will pick up once the rains hit the north Indian states. Therefore, actively all of them were covering. Adding to the price rise will be the freight rates from Asia to North America which are also moving up dramatically form July 1, 2010.

Transit time
A reported increased transit time from the supply origin due to reduction of vessel and container availability might turn out to have some impact on the market, they said. Given the tight supply position, Indonesia also resorted to a firmer tone and continue to set the market on black pepper, according to an overseas report. “There has been little follow through by the US buyers. Vietnam is withdrawn and the Indian market keeps pushing the upper limits. Brazil"s offers have also risen but this has failed to bring out additional sellers. Brazilian new crop estimates range between 25,000- 28,000 tonnes.”

Sri Lanka is trading at competitive levels for non- ASTA qualities. Ecuador"s new crop is expected to start in the next few weeks. According to the International Pepper Community (IPC) black pepper market was steady and prices at sources increased further, with the exception of Sri Lanka.

There was no selling pressure at origins, although initial crop in Lampung has started. It is reported that export of pepper from Vietnam up to May was considerably good and limited quantity is being controlled by farmers. Under this situation, exporters faced difficulties to accumulate stocks.

At HCMC local prices have been increasing almost daily. On an average, the price increased by 4 per cent locally and 1 per cent in freight on board. In Lampung, prices have increased due to better demand.
Trading, however, was very limited as material from initial crop has yet to arrive in the market. In Sarawak, local prices increased by 3 per cent and 4 per cent in fob. Similar trend also took place in India, where futures prices are reportedly increased by about 6-8 per cent. In Sri Lanka, pepper price at growing areas decreased marginally by 1 per cent.

It was reported that fob price of Sri Lankan black pepper at Colombo stood at SLRs 418.70 a kg ($3,695/ a tonne) this month.

Local prices of white pepper at sources increased marginally. Fob price in Sarawak increased by 3 per cent, while in Bangka and HCMC, stable prices have been reported.

 

From The Hindu Business Line...