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G.K. Nair

Lack of confidence in quality of material lying in warehouses

Kochi , Dec. 7

Pepper futures fell sharply on Thursday on bull liquidation and other factors such as the announcement by the Kerala State Marketing Federation (Marketfed) that it would sell 300 tonnes of pepper held by it and absence of buying support due to lack of confidence in the quality of the materials available with the exchanges.

As a result, the futures contract for December, January and February touched flooring levels on the NCDEX on Thursday. All the other contracts on both NCDEX and NMCE fell sharply, market sources said.

Quality concern

The net open position of about 7,000 tonnes with the NCDEX was also forcing those holding long positions to liquidate or switch over. The reason for such a situation is lack of confidence in the quality of the material lying in the warehouses, market observers here told Business Line.

Exporters might buy if made available at a discounted price. Even depositors are also said to be ready to buy at discounted prices so that they could sell in another exchange, they alleged.

Wait-and-watch

In the international market, the buyers are waiting and watching the situation even though there are only two sources viz., India and Brazil. Others, mainly Indonesia and Vietnam have not much to offer and, hence, quoting prices much above the Indian parity. Indonesia was quoting $2,900 a tonne (c&f) while Vietnam was offering Asta grade at $2,775 a tonne.

Brazil said to be quoting at $2,425 a tonne (f.o.b.) while the Indian parity was at $2,525-2,600 a tonne (c&f). But, there are no takers even at these rates.

The reports that Vietnam will have an early harvesting and Indian new crop will hit the market soon appear to have enthused the overseas buyers to hold back till that time. Added to this was the announcement that the Marketfed would sell 300 tonnes of black pepper it procured last year, which had "added fuel to the fire", they said.

The spot prices in tandem with the futures market trend fell by Rs 300 a quintal to close at Rs 9,400 (un-garbled) and Rs 10,000 (MG 1) on Thursday.

Pending sales

Exporters having pending sales said to have covered farm grade spot pepper estimated at 30-40 tonne at Rs 93, Rs 94 and Rs 95 a kg.

December contract on NCDEX fell by 398 tonnes to close at Rs 9,553 a quintal on Thursday from Rs 9,951 on Wednesday, while on NMCE, it dropped by Rs 378 a quintal to close at Rs 9,061 from Rs 9,439.

The fall in other contracts on NCDEX was from Rs 407 to Rs 433 a quintal while on NMCE it was from Rs 385 to Rs 399 a quintal.

The total turn over on NCDEX on Thursday increased by 7,061 tonnes to 27,388 tonnes on Wednesday. On NMCE, it was up by 300 tonnes to 4,166 tonnes.

The total open interest on NCDEX on Thursday was down by 660 tonnes to 23,701 tonnes yesterday. The net open position for December dropped by 905 tonnes to 6,874 tonnes, while January was down by 124 tonnes to 11,569 tonnes.

On NMCE, the total open interest on Thursday dropped by 112 tonnes to 4,917 tonnes on Wednesday.

The December open interest dropped by 343 tonnes to 2,689 tonnes.

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