The pepper market last week witnessed a series of measures aimed at arresting highly speculative activities in the trade,
The measures appear to have limited activities with liquidation and drop in prices. Consequently, the trading scenario has shown a mixed trend with marginal changes at the weekend.
May contract on the NCDEX witnessed a marginal increase June and July declined slightly during the week. May moved up by Rs 70 to the last traded price (LTP) of Rs 37,450 a quintal, while June and July declined by Rs 95 and Rs 20 a quintal during the week to the LTP of Rs 38,060 and Rs 38,700 a quintal.
Total turnover fell by 5,635 tonnes to end at 16,298 tonnes. Total open interest dropped by 336 tonnes to 5,566 tonnes.
Spot prices were up by Rs 200 a quintal during the week to close on Saturday at Rs 36,800 (ungarbled) and Rs 38,300 (MG 1) a quintal.
Balanced approach often seems to be lacking while imposing new measures to curb certain things, says the trade.
In fact, since Nov-Dec, as the new crop arrivals from Kerala's southern districts showed limited arrivals coupled with feedback from the farmers indicating shortfall in production more than 60 per cent from these districts activated Indian extraction units, who normally cover immature pepper, to buy Green pepper at a premium from the farmers inducing them to pluck immature green pepper suitable for extraction.
As reports of shortfall in production in the country started gathering momentum, big operators in the futures delivery market started covering from the exchange platform where thousands of tonnes of pepper was being traded regularly, therefore the cornering/covering by these big operators was not noticed by the trade in general. However, as they took delivery of large quantities in November, the cat was out of the bag. Exploiting the limited availability of physical pepper due to shortfall in production, operators also pushed up spot pepper prices to Rs 350 a kg to Rs 365 a kg.
As arrivals were not picking up and availability of spot pepper in the physical market remained tight, Indian pepper prices were ruling firmer compared to other origins in the international market.
Exporters with pending commitments for March, April, May, June were seeing huge losses to fulfil their commitments because of the spurt in the market specially future delivery prices on the national exchange platform. Therefore, representations were made by the Exporters' Organization to the Spices Board to put curb on the futures delivery markets as well as to seek permission to import 10,000 tonnes of pepper to support the consumer who was paying Rs 300-350 a kg while the international market was ruling at around Rs 150/200 a kg.
Pepper farmers, on the other hand, in their representations said their production was only 40-50 per cent of last year's production and hence their earning had come down to an average of Rs 200 a kg and hence demanded that their interest must be protected because of the high input production cost which included high labour cost as well. In spite of the fact that pepper future prices were being trading below spot prices, the regulator introduced many curbs in the pepper futures. The first was to reduce the validity of the deposited pepper from six to four months with no revalidation allowed.
Secondly they brought down the penalty clause from 3 per cent to 1.5 per cent. Therefore, it is suggested that for a compulsory delivery contract there should not be any penalty clause which will water down the entire sanctity of the compulsory delivery contract by introducing penalty clause in case of default by seller.