Commodities

Pepper futures witness high volatility

G. K. Nair Kochi | Updated on May 08, 2011


Pepper witnessed high volatility last week with prices shooting up and crashing down on the tug of war between bear and bull operators.

The market was seen running without any adherence to the fundamentals. There were occasions of the market falling sharply when there was good buying support and in the absence of any selling pressure.

Availability is claimed to be only on the exchange platform now. Exporters are said to be afraid of making offers to overseas buyers as they are apprehensive about delivery of the material from the exchange platform and for fear of potential defaulting, trade sources told Business Line. They said the Indian parity currently is in line with other origins and there could be some business coming up. But, having witnessed some defaults in recent days, some of the exporters said they were not able to make any firm commitments.

At the same time, availability in the primary markets were limited and the growers and dealers there were reluctant to release their material on the hope that prices might touch Rs 300 a kg.

Overall, there was a tight supply scenario and yet bear operators succeeded in pushing the market down last week.

All contracts on NCDEX dropped. May, June and July fell by Rs 580, Rs 989 and Rs 1,068 respectively to close at Rs 28,571, Rs 28,776 and Rs 29,188 a quintal.

Total turnover dropped sharply by 18,216 tonnes to close at 84,915 tonnes at the weekend. Total open interest showed a significant increase of 1,886 tonnes indicating good additional purchases during the week to close at 18,869 tonnes on Saturday.

Spot prices also dropped by Rs 300 a quintal, in tandem with the downward trend in the futures market and not because of any selling pressure, and closed at Rs 27,100 (ungarbled) and Rs 27,900 (MG 1) a quintal.

The market continued to face a squeeze in supply following reluctance by Vietnamese farmers to release their produce at lower levels. Availability in Indonesia is currently claimed to be tight. On the other hand, Indonesian sellers are said to be shy in selling forward positions due to concerns heavy freight rate increases and expectations of higher prices in the second half of 2011, an overseas report said.

IPC ASSESSMENT

According to the International Pepper Community (IPC) report, the black pepper market continued to remain bullish last week. The continued price increase is likely to be unabated in view of the global short supply. New material from Lampung is expected only by July/August 2011. A weakening of US dollar is also a factor influencing the increase.

In Lampung, prices increased by 3 per cent with very limited activity. Local price of Sarawak black was stable at MYR 13.4 a kg, while the fob price increased by 3 per cent. Significant increase of 11 per cent was recorded for Sri Lankan pepper price at growing areas.

White pepper

In Bangka white pepper prices increased by 3 per cent. Sarawak white pepper prices was stable, while fob prices increased marginally by 1 per cent. In Vietnam, the white pepper price was reported stable.

Published on May 08, 2011

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