The entry of big operators with huge funds in the commodity markets and the consequent tug of war resulting in high volatility appears to have eventually made many genuine operators to lose confidence in the market.

What is happening, of late, on the National Commodity exchange trading in pepper futures is allegedly against the principles of futures trading, trade sources told Business Line . According to them, there should be “0” delivery at the time of maturity of each contract and at the same time the prices of futures and the spot should also converge.

“And this is not happening on the exchange and the prices are artificially either pushed up or pulled down and that is why delivery is being opted for,” they said.

Citing unhealthy trade practices some of the traders demanded that the regional commodity specific exchange should be revived and pepper should be traded on that platform only. They alleged that the big operators after creating problems in Guar Gum, Chilli, Turmeric, Cumin trade has now entered the pepper market.

The big operators who reported to have cornered an estimated 7,800 tonnes of pepper are allegedly trying to play different tactics to make good the losses they are likely to incur following the sharp fall in the pepper prices in recent weeks.

In fact, the cartel had taken a wrong decision by cornering such huge quantity of pepper, market sources pointed out.

Making things worse for them many investors who had taken delivery of pepper prior to June, i.e., before the entry of the cartel and beginning of its squeezing and cornering activities, deposited back the material from June onwards, they said. The bear operators got back into the driving seat on Friday by making the propaganda that around 7,800 tonnes of pepper cornered by the bull operators' cartel would come to the market soon. The validity of the material would expire on Jan 5.

Meanwhile, the Kerala farmers and dealers had already liquidated their stocks when the prices were ruling high above Rs 400 a kg, they said.

Arrivals

Fresh pepper started trickling in albeit in small quantity. Dealers from Tamil Nadu were covering directly from the primary markets and the farmers. Besides, good quantity of pepper is being bought by pilgrims on their return from Sabarimala when they pass by Kerala's main pepper growing districts of Idukki, Pathanamthitta and Kollam. Thus, daily an estimated 5-7 tonnes of pepper is moved out directly. Some of the upcountry demand is met by supplies from Erode in Tamil Nadu also, they said.

If good quantity of pepper validity of which is expiring on Jan 5, is reprocessed that might result in a squeeze in availability before the picking up of the new crop arrival, they said.

The futures market has been fluctuating and the prices at the weekend showed a marginal rise in the active contracts.

Feb, Mar and Apr contracts increased by Rs 380, Rs 85 and Rs 50 respectively a quintal to close at Rs 34,970, Rs 34,510 and Rs 34,570 a quintal.

Total turn over increased by 3,699 tonnes to 11,703 tonnes. Total open interest dropped by 1,173 tonnes.

Spot prices last week fell by Rs 400 to close at Rs 36,800 (ungarbled) and Rs 38,300 (Garbled) a quintal despite good domestic demand amid tight supply.

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Published on December 23, 2012