The pepper market continued to witness the tug of war between both bears and bulls leading to high volatility in the market last week.

The market is experiencing a tight supply situation and prices have been moving up. Availability of spot pepper in the physical market is thin and it pushed prices up last week.

On the exchange also, prices of all the active contracts went up on supply constraints caused by non-delivery of material from the exchange warehouses. Delivery has been blocked following locking up of about 8,000 tonnes of pepper in the warehouses following alleged detection of adulterants in the material. The Food Safety authorities have sealed the warehouses and the material will be released only after each lot is tested by designated laboratories.

Traders said that arrivals from the primary market are very thin. According to dealers, who liquidated the stock when prices ruled above Rs 400 a kg, are now replenishing their stocks. Some farmers are also doing the same thing, they said.

Another problem is non-availability of labour for harvesting. In several areas, ripe pepper berries dried up while the spikes were in the vines and fell. In a small garden, a worker was employed to pick up the dried berries from the ground. This seasonat least 50 per cent of the crop has been lost. Thus, there has been a squeeze in supply. At the same time there has been an upsurge as Dec to Mar is the peak demand season in north India. Non-availability of the material at a time when there is a strong demand has resulted in the prices shooting up on the spot market.

Even at Rs 414, spot material is not available, according to the trade.

At present, there is a monthly demand of around 5,000 tonnes of pepper in the domestic market but the material is not available, the trade said.

Unfavourable weather conditions are also impacting the market. In several areas, vines are drying up due to drought-like conditions. If this condition persists, the next crop could be poor, they claimed.

On the NCDEX last week Feb and Apr contracts moved up while Mar showed a marginal decline. Feb increased by Rs 680 a quintal to close at Rs 38,865 while Apr increased by Rs 300 to Rs 35,625 . Mar declined by Rs 5 to Rs 36,940 .

Total turn over increased by 3,947 tonnes to 11,129 tonnes. Total open interest rose by 300 tonnes to 3,599 tonnes.

Spot prices increased by Rs 800 to close at Rs 39,900 (ungarbled) and Rs 41,400 (MG 1) a quintal on Saturday.

Indian parity in the international market was at $8,300 a tonne (c&f) prompt shipment. The favourable exchange rate for imports might prompt importers to bring in Vietnamese pepper in the coming days if the rupee continued to strengthen.

(This article was published on February 3, 2013)
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