Pepper turns hot as demand outpaces supply

G. K. Nair Kochi | Updated on January 27, 2013 Published on January 27, 2013


The pepper market turned hot on strong domestic demand amid limited supply creating an upsurge in all the active contracts on the exchange and on the spot market last week.

Aggressive buying of the material directly from the growers at terminal market prices by inter-State dealers from Tamil Nadu and Wayanad district of Kerala bordering Karnataka is pointed out to show the intensity of the domestic demand.

Besides, Kalady in Ernakulam district is understood to have become a top trading centre for movement of pepper by rail to north Indian markets, mainly to those buyers who do not want a bill. The second such trading centre is claimed to be Erattupetta in Kottayam district.

Meanwhile, Kalpetta and Sulthanbathery in Wayanad have also become major hubs of inter-State pepper trade.

slack supply

Supply has not picked up as expected during this time of the season.

The reasons attributed to the squeeze are – first, the rich growers who had liquidated their stocks of pepper when the prices were ruling high above Rs 400 a kg, are replenishing the stocks. Secondly, there is said to be an acute shortage of skilled workers for plucking the mature berries. Even at asking wages of Rs 1,000-1,200 a day, workers are said to be not available. “Immigrant workers are not suitable as they have no experience with the crop and the job”, an Idukki grower said.

Thirdly, there were buying of light berries/green pepper by industry in recent days, the trade claimed. All these factors are said to have resulted in a squeeze in supply of spot pepper.

On other hand, to aggravate the squeeze in availability further an estimated 8,000 tonnes of pepper is locked up in the accredited warehouses of the exchange by Food Safety and Security authorities for alleged presence of mineral oil.

Consequently, there is no material available on the exchange platform.

robust demand

At the same time, a strong domestic demand is felt. All the pipelines in the upcountry markets are empty following liquidation of the stocks by dealers when there were opportunities before them to sell at moderately high prices. They did so on the basis of reports of good crop during the current season.

Apart from this, small and medium units used to buying spices during the winter months for grinding/crushing as the grinding loss during this period is much less, were also covering. This phenomenon has also aided the upsurge in demand of late. Besides, the consuming markets are also claimed to be empty.

Thus, there has been a mismatch in demand and supply last week and that phenomenon was reflected on the prices. The bull operators pushed the market up with the support of the fundamentals.

However, the Indian parity for Jan and Feb shipments remained non-competitive in the international market. Indonesia is said to have exhausted its current crop while Vietnam and Brazil are also said to be with very thin stocks.

On the NCDEX last week, all the active contracts soared on strong demand amid limited supply. Feb, Mar and Apr contracts last week increased by Rs 725, Rs 2,195 and Rs 1,695 respectively to close at Rs 38,195, Rs 36,935 and Rs 35,650 a quintal at the weekend closing.

Total turn over decreased by 4,235 tonnes to close at 7,182 tonnes. Total open interest declined by 50 tonnes to 3,271 tonnes.

Spot prices during the week surged by Rs 600 a quintal on strong domestic demand and thin arrivals and closed on Saturday at Rs 39,100 (ungarbled) and Rs 40,600 (MG 1) a quintal.

Indian parity in the international market for Jan has soared to $8,350 a tonne (c&f) at spot prices. Feb and Mar parity were at $7,400 and $7,150 respectively. All other origins were said to be offering at around $7,000.

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Published on January 27, 2013
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