Pepper futures continued to witness high volatility and a declining trend on bearish sentiments during the week despite the fundamentals remaining unchanged. Reports from overseas, of late, have been bullish.

Indonesia and Brazil showed firmer trend while Vietnam which has been offering lower grade pepper at slightly lower rates, has not shown any interest to sell higher grade black pepper. It is more lucrative for the Vietnam farmers to convert the bold berries into white pepper at a comparatively much lower cost and earn very high prices at the local/international markets. Consequently, availability of black asta grade pepper in Vietnam is appeared to be limited.

The supply projections for the current year by the IPC and other agencies have not been encouraging. If these estimates are turned out to be true then there is a likely squeeze in availability this year. Given the consistent consumption growth of an estimated 3 per cent a year, there could be a mismatch between demand and supply in 2011. This, in turn, could keep the market firm.

Asta grade pepper prices have been, by and large, stable at above $5,000 a tonne, even after the harvesting in Vietnam has commenced and it could be construed as a reflection of the squeezed supply scenario. Even in India where harvesting of the current crop is in its final stages, the arrivals continued to remain thin when compared with that of the previous seasons. The squeeze in supply could be attributed to replenishment of stocks by the major growers who had liquidated their 3-5 year old stocks when the prices were ruling above Rs 200 a kg and to the direct buying from the primary markets by upcountry dealers. Both these factors reduced the arrivals at the terminal market considerably. There is material available but in a limited quantity, market sources told Business Line .

All the contracts during the week declined after high volatility. March, April and May contracts dropped by Rs 291, Rs 133 and Rs 111 respectively to Rs 22,421, Rs 22,786 and Rs 23,024 a quintal.

Total turn over fell by 13,600 tonnes to 39,174 tonnes. Total open interest however increased by 1,148 tonnes indicating good additional purchases and yet the market declined.

Spot prices in tandem with the futures market trend dropped by Rs 200 to Rs 21,800 (un-garbled) and Rs 22,600 (MG 1) a quintal.

Global trend

According to International Pepper Community (IPC), black pepper market development at sources remained mixed with limited activity. Local prices in Kochi, Lampung and Sarawak were down by 1 per cent. At other sources, however, the price increased marginally. In Kochi, the market was calm. Trading activity at the Commodity Exchange was limited. In the beginning of the week, the price decreased from the last week's close. On Thursday, March 3, the prices have recovered. On average, however, the prices was lower marginally by 1 per cent from the previous week's price.

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