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Pepper remains hot on tight supply

G.K. Nair
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Pepper prices were highly volatile last week on bullish activities. Arrivals of farm grade pepper continued to remain tight.

Availability on the exchange platform was also limited. Domestic demand started picking up following the monsoon in some parts of north India. Buying interest was seen from big investors in commodities to corner whatever material was available anticipating a further shortfall because of unfavourable weather conditions.

Meanwhile, there were reports of close monitoring of the market by the Forward Markets Commission (FMC). Latest statements by the Commission and the Union Minister, Prof K.V. Thomas, is said to have created a fear psychosis in the minds of many in the trade.

They said if the regulator decides to close down futures trading in pepper because of high volatility and excessive speculation as Indian pepper is out-priced in the world market by nearly $1,300 a tonne compared with other origin, the decision at this stage “will be suicidal for the genuine hedgers.”

The black pepper futures delivery market at the national exchange platform NCDEX traded on Friday with much lower turnover compared with the the previous day and the net open position at close was higher compared with Thursday.

Reports quoted the FMC Chairman and the Consumer Affairs Minister, Prof K.V. Thomas as saying that the regulator would take action when required and, if need be they will ban futures trading in such commodities which are highly volatile and trading speculatively. Prices shot up last week on the exchange. The August, September and October contracts increased by Rs 775, Rs 590 and Rs 485 respectively to the last traded price (LTP) of Rs 44,050, Rs 44,240 and Rs 44,660 a quintal.

Total turnover increased by 3,060 tonnes to 27,169 tonnes. Total open interest went up by 1,744 tonnes to 8,017 tonnes. Spot prices soared by Rs 800 a quintal to close at Rs 40,900 (ungarbled) and Rs 42,400 (garbled) a quintal on strong buying support. Meanwhile, overseas reports were both bullish and bearish. Some indicated that in Vietnam farmers were being advised to hold back as prices would move up after some time. At the same time, some others were saying that the next Vietnamese crop would be around 1.5 lakh tonnes and hence holding back would be suicidal.

However, the actual availability position in all the other origins is still unclear. But prices there were far easier and much below the Malabar parity. For MG 1, there is huge domestic market here.

Indian exports during Jan-June 2012 stood at 10,197 tonnes as against 9,059 tonnes in the corresponding period last year. As against this imports during the same period in 2012 were at 6,730 tonnes compared with 6,288 tonnes in Jan– June 2011.

(This article was published in the Business Line print edition dated July 30, 2012)
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