G.K. Nair
Kochi, May 16
The pepper futures continued to remain under the control of operators who were pushing up and pulling down the market. Continuous buy calls from expert analysts of brokers facilitated the upward run of the market without any fundamental support.
High volatility in the market kept both buyers and sellers away. In fact, physical pepper was not available. As a result, processors who had sold to investors earlier found it difficult to cover ready pepper from the open market. Consequently, they decided to buy May delivered pepper from the exchange at a premium. This phenomenon had helped the operators to push up the market while the investors could not counter it.
Meanwhile, as the prices shot up the exchange slowly and covertly introduced 4 per cent additional margin on purchases during the week and then that was withdrawn and introduced additional margin of 3 per cent on both buyers and sellers on their outstanding position in May. All these decisions without prior information have driven small and medium players away from the market, they alleged. According to them, the exchange should fix a base price and a ceiling level and vice-versa for introducing additional margins. In the absence of such a mechanism, majority of the players would remain unaware of the additional margin and when it becomes unaffordable they would resort to liquidation, market sources told Business Line.
The exchange stock has been surging ahead with fresh deposits everyday at an average of 100 to 150 tonnes. At the weekend stocks had gone up to 3,105 tonnes with 200 tonnes in the processing.
In the absence of physical pepper in the Kerala market, some expressed apprehensions about the possibility of some part of the Sri Lankan pepper arriving in the country for value addition and re-export at comparatively low prices might enter the domestic market where the prices are ruling high. Much of the domestic demand has been met by supplies from Karnataka with Coorg pepper at Rs 5 a kg below the Kerala price, they said.
The domestic market easily consumes around 3,500-4,000 tonnes of pepper and it is on a consistent growth trading sources said. Therefore, it can absorb significant quantity of the material keeping the prices not from falling sharply. Given this situation, high Indian prices would always benefit other origins, they said.
All the contracts on the NCDEX during the week moved up. May, June and July were up by Rs 276, Rs 295 and Rs 283 respectively to Rs 16,480, Rs 16,925 and Rs 17,174 a quintal. Total turn over fell by 38,078 tonnes to 71,905 tonnes. Total open interest increased by 559 tonnes during the week to 16,678 tonnes at the weekend. Spot pepper prices shot up by Rs 400 a quintal during the week to Rs15,800 (un-garbled and 16,300 (MG 1) at the weekend close on good buying support amid limited availability and in tandem with the upward trend in the futures market during the week.
Indian parity in the international market shot up and remained out priced at above $3,900 a tonne (c&f) Europe and $4,000 a tonne (c&f) USA. Other origins who have been closely monitoring the Indian futures market trend fixed their prices slightly below the Indian parity and drove away with orders from major overseas buyers. Thus, the Indian operators are, in fact, holding umbrella to other producers to sell their produce at highly remunerative prices. However, there are chances for MG 1 getting some orders from the US, provided if it remained competitive, given the delay in getting US Food and Drugs Administration clearance for the black pepper consignments from Vietnam to the American markets. Also the reported exhaustion of Brazilian black pepper stocks and depletion in Indonesian stocks of its previous crop, might pave the way for buyers turning to India.
Add to this, the total global pepper output is predicted to low this year, market sources told Business Line. The black pepper market strength remained stalled, “probably more in reaction to the financial fluctuations in the stock and currency markets than to supply/demand”, an overseas market report said. But, “as this situation appears more stable in the short term, we are seeing some signs of renewed market activity”, it said.
According to the International Pepper Community report for the week said black pepper market correction took place in India during the week. Average prices felt by around 3-4 per cent from last week"s prices. Trading was also slightly down. It is expected that the upward trend will continue. In Vietnam, local prices at HCMC increased marginally, but f.o.b prices were reported stable at $2,745 and $2,825 a tonne for 500 GL and 550 GL respectively. In Lampung, local prices were unchanged, with very limited activity. In Sarawak, local prices increased by 2 per cent, but f.o.b price was down by $100 a tonne. In Sri Lanka, average prices at growing areas decreased marginally by 1 per cent.
In Bangka, white pepper prices were reported stable. In Vietnam local price of white pepper increased significantly by 7 per cent. The increase also took place marginally in Sarawak, both for local and f.o.b.
From The Hindu Business Line...
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