Tight supply, bullish activities keep pepper market hot

Pepper market after midweek has been highly volatile and bullish with bull operators remaining in the driving seat pushing the market up substantially. With the sharp rise in February delivery price, Indian pepper has become out-priced and hence at the current levels no overseas demand is likely.

Buyers are now waiting for Vietnamese pepper to arrive in good quantity pushing pepper prices down. Vietnam has been offering 500 GL and 550 GL pepper at $4,150-4,450 a tonne (fob) respectively. Overseas buyers would go for it as availability of asta grade pepper in Vietnam might be tight following upsurge in white pepper prices.

It would convert all bold berries into white. The processing cost is also comparatively much less. Therefore, there could be possibility of a squeeze in availability of asta grade.

Also, availability of Vietnam pepper would depend on the volume of cross-border trade with China. Brazil does not seem to have much material to offer at present and hence from now onwards till the arrival of the Indonesian new crop in Aug/Sep, Vietnam may remain the sole source of pepper.

Meanwhile, availability in India is limited due to poor crop. Supply from the southern districts of Kerala has become very thin. Arrivals have to pick up from the spices district, Idukki and Wayanad.

In fact, India may not have much indigenous pepper left for export and whatever is available at current prices would be absorbed by the strong domestic market. The only possible threat to domestic prices, which might emanate in the coming days, would be from cheap pepper imported from Vietnam for value-addition and re-export.

Imported bold berries could be sold as Wayanadan pepper in the domestic market at the prevailing premium price on the one hand and on the other, after making substantial gains cheap material could be dumped into the domestic market and pull prices down for covering cheaper to meet the export commitments, growers said.

During the weekend, February delivery prices has soared and surpassed March by over Rs 300 a quintal due to the tight supply situation as sellers withdrew, while speculators and operators were in control of the market. Bulls who were suffering for the past three-four deliveries appeared to have mustered strength and held on to their positions, which in turn pushed prices sharply up, market sources told Business Line.

All contracts on the NCDEX soared during the week. February, March and April increased by Rs 2,512, Rs 1,959 and Rs 1,736 respectively to close at Rs 25,366, Rs 25,053 and Rs 25,116 a quintal.

Total turnover during the week soared by 77,347 tonnes to close at 1,19,656 tonnes at the weekend. Total open interest also increased by 4,678 tonnes to close at 18,481 on Saturday showing good additional purchases.

Spot prices surged by Rs 1,500 to close at Rs 23,200 (un-garbled) and Rs 24,000 (MG 1) a quintal at the weekend close, in tandem with the futures market trend and tight supply situation.

Indian parity in the overseas market is at around $5,600-5,650 a tonne (c&f) and remained much above other origins.

IPC report

According to the International Pepper Community (IPC), black pepper market showed moderate improvement in India. Trading at the Commodity Exchange was active during the week. Small quantity from the new crop has arrived in local market. Prices increased by around 3 per cent in both spot as well as futures and fob prices. In Vietnam, activity are still limited.

Slight increase was also recorded in Sarawak and Sri Lanka.

White pepper

In Bangka, white pepper prices increased, while in Sarawak prices was stable. In HCMC, local prices increased on Friday from VND 1,15,000 a kg VND to 1,22,500. In China, players are still on holiday.

Indian exports of whole pepper dropped sharply by 30 per cent in 2010 from that of the previous year while with an import of 18,000 tonnes, the country became a net import last year, according to the IPC.