The Hindu Business Line : Pepper futures recover on good buying support

Kochi, Nov 30 Pepper futures market witnessed high volatility during the week with the prices dropping sharply on selling pressure and bearish activities and then recovering during the weekend on good buying support.

The inherent strength of the Indian pepper viz., a strong domestic market, is appears to be playing its vital role to keep the pepper prices up even as the western markets are in the grip of severe credit squeeze consequent to the global economic recession on the one hand and the spreading of market depressing reports from overseas of increased availability in Indonesia on the other.

All contracts on NCDEX dropped by Rs 462 to Rs 697 a quintal and on NMCE it was from Rs 499 to Rs 580 a quintal. Total turn over dropped by 9,202 tonnes to 23,476 tonnes. Total open interest during the week declined, by 970 tonnes, to 10,600 tonnes.

Spot prices, also in tandem with the futures market trend, fell by Rs 300 a quintal to close at Rs 11,000 (un-garbled) and Rs 11,500 (MG 1) on Saturday last.

The recovery of the market at the weekend implies that the fundamentals continued to remain strong, market sources told Business Line.

Indonesians are said to have admitted that the figures given by them at the International Pepper Community meeting held in the Vietnamese Capital during November 24 -27 were wrong. Black pepper availability, currently is understood to be in India and Brazil till the new Vietnamese crop hits the world market in late March-early April 2009.

Given this scenario, some demand is expected to come to India and it is evident from the buying activities of the exporters, of late, from the investors who were liquidating validity-expired stocks and buying back their sales.

Domestic demand

The domestic demand has received a boost following the decision of the Tamil Nadu Government to supply spice kits worth Rs 70 at Rs 50 a kit to people living below poverty line.

Add to this, the thousands of Ayyappa devotees trekking to the hill shrine, Sabarimala, this year, who are said to be buying black pepper in 500 grams and 1 kg packs at Rs 125-150/kg from retail outlets on their return journey from the temple.

Several shops en route to Pathanamthitta and to Cumbum, Madurai via Kumily are selling spices, mainly black pepper.

During the two-month pilgrimage season, lakhs of devotees travel to the shrine from November 16 to January 14, 2009. If the current trend is any indication, this year, large quantities of black pepper would be sold during the pilgrim season as the sales on weekends are said to be in the range of 5-10 tonnes a day.

Once normalcy returns to Mumbai after the terrorist attacks and the election fever in Delhi is over, fresh demands would come from these main centres — which cater to the retail outlets in the neighbouring States. Mumbai absorbs around 25 per cent and Delhi about 40-50 per cent of domestic demand.

Output tally

The Indian output in 2008 is estimated at 43,000 tonnes of black pepper, while the projection for 2009 is 50,170 tonnes. In fact, the internal demand equals the total production, trading sources said. As a result, the Indian spices extraction industry and exporters import black pepper from other origins to meet their requirements.

The IPC’s total pepper projection for 2009 is 3,05,070 tonnes (2,45,600 tonnes of black and 58,470 tonnes of white), which includes the total output of non-IPC countries. The total production in 2008 is estimated at 2,91,000 tonnes — 2,24,900 tonnes of black and 66,100 tonnes of white pepper. It shows an increase of a little over 14,000 tonnes from the total availability in 2008. There is unlikely to be much difference between the demand and supply next year when the 3-4 per cent annual growth in demand is taken into account, they said.

Indian parity was at $2,475-2,500 a tonne (c&f) Europe and $2,575-2,600 a tonne USA despite an increase in prices because of the depreciation of rupee against the dollar.

All the other origins remained unchanged and the overseas markets were reportedly quiet, as buyers were on a ‘wait-and-watch’ mode.