The Hindu Business Line : Pepper futures drop despite strong fundamentals

When all the other markets were on the upward swing, the futures market here is witnessing high volatility and sharp decline in prices at the hands of market manipulators and speculative operators.

G.K. Nair

Kochi, Oct 5 The pepper futures market last week witnessed high volatility and prices continued to decline after mid-week even as the fundamentals were remaining strong.

Tight supply position in all the origins coupled with indications of potential demand in the last quarter of the current year, appears to have pushed up the prices in other origins. Indian parity at the weekend dropped to remain competitive.

Availability of black pepper in the country is also said to be tight.

The exchanges are understood to be holding only around 5,000 tonnes. Major growers are not interested to liquidate their ‘iron stocks’ at the current price.

High volatility

Given this scenario there are chances for orders coming to India.

In fact, last week some business had taken place with the US and Europe at $3,400 a tonne (c&f), In fact, Vietnam and Brazil were steady with indications of upward swing. Overseas markets were comparatively active last week with business taking place for various grades of black pepper.

At the same time, indications were that many of the buyers hadn’t covered for the last quarter of the year while at least 70 per cent for the next year requirements also would have to be covered.

Thus, at a time when all the other markets were on the upward swing, the futures market here was witnessing high volatility and sharp decline in the prices at the hands of market manipulators and speculative operators.

Exporters were not coming forward to cover, market sources told Business Line.

It is sending out wrong signals. Vietnam is reportedly following closely the futures market in India, they said.

All contracts fell during the week and the decline was from Rs 387 to Rs 499 a quintal.

Surprisingly, all the first three contracts dropped to below the spot price of MG 1 of Rs 13,800 a quintal.

October, November and December contracts at the weekend close were at Rs 13,084, Rs 13,293 and Rs 13,550 respectively.

Widening gap between the futures and the spot price is not a good sign, they said.

Turnover

Total turnover on NCDEX during the week fell by 21,158 tonnes to 30,020 tonnes. Total open interest declined by 69 tonnes to 18,253 tonnes.

Spot prices during the week moved up by Rs 100 to close at Rs 13,200 (un-garbled) and Rs 13,800 (MG 1) a quintal at Saturday close. Restrictions on the nearby month position were also negatively impacting the trade, Mr Kishor Shamji, President, IPSTA told Business Line.

Around 100 per cent turnover is in first three deliveries.

Similarly, 93 per cent of the open interest is also in the first three deliveries.

According to an overseas report, Brazil was choosing to abstain from offering while Vietnam was looking for higher prices, such as $2,750 a tonne (f.o.b.) for 500 GL Faq. Indian parity has dropped further at the weekend because of the sharp fall in the futures market price to $3,100-3,200 a tonne (c&f).

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