Strong demand amid tight supply last week on Friday pushed spot pepper prices to the highest- ever level of Rs 343 a kg for ungarbled and Rs 358 a kg for MG 1. Meanwhile, the final outcome of last week's trading on the futures market gave the impression that there was a “neck-to-neck tug of war” between the bull and bear operators with both gaining marginally at the weekend.

It sends out the impression that some are working hard to pull the market down for covering while some others are bent on pushing up the market for selling.

This kind of high volatility, at a time when all other origins are firm and ruling above the MG 1, would only help to steer away overseas buyers besides depriving exporters of potential business as many of the exporters might not be able to book orders because of high fluctuation in prices. Some were able to book firm orders and covered against them.

On the other hand, it also becomes difficult to cover as availability is claimed to be very tight. On the exchange platform, less than 2,000 tonnes of pepper were available of Oct delivery at the weekend close and there are hardly four days left for its maturity. On the spot, growers and primary market dealers are said to be releasing only small quantities cautiously at every hike.

Those big growers who can afford to hold the produce for long and fully aware of the international and domestic market pulses are reluctant to sell even at current prices, which are at historical levels.

Liquidation of stocks

Domestic demand has also not yet picked up probably because of liquidation of stocks held by upcountry dealers in Delhi, Maharashtra, Madhya Pradesh, Rajasthan etc. They were reportedly selling at Rs 345 a kg the material they bought when prices were at lower levels.

Meanwhile, Karnataka operators were said to be offering at Rs 345–347 a kg delivered anywhere in India, market sources told Business Line.

Good quantity of spot pepper was reportedly traded in several directions last week at the price range of Rs 343-353 a kg and exporters were the main buyers. Once upcountry dealers exhausted their stocks they would have to revert to the market to cover for their future winter/festival requirement.

Domestic and overseas buyers, who had postponed their buying on the anticipation that prices would decline had to cover. Availability of material in India is, by and large, on the exchange platform. In the international scenario conflicting reports are emanating from the overseas markets.

Some come out with bearish reports while others are highly bullish.

Such reports are also putting the market in a dilemma. However, the firm price trend prevailing in the market for some time now is being construed as the result of a strong supply squeeze.

At the same time, some of buyers may have to cover for the winter season and Christmas and New Year, and many might not have been maintaining huge inventories because of the heavy investment involved.

Therefore, demand could be expected in the coming days and since India is the only competitive source at present orders might come for MG 1, the trade said.

Global market

Indian parity continued to remain competitive in the international market at $8,050-8,100 a tonne C&F.

However, many of the small and medium exporters alleged that they were leaving overseas orders for want of matching credits for financing their export orders.

The unprecedented rise in the price of pepper which has shot up from Rs 150 a kg to Rs 358 a kg has made “it difficult for these exporters to finance their export orders in the absence of matching credit facilities and what is available at present is costly. Besides, pre and post shipment finances are also hampering,” they said.

Mixed trend

Last week Oct, Nov and Dec contracts on the NCDEX showed a mixed trend. Oct and Nov moved up marginally by Rs 245 and Rs 5 respectively during the week to close at Rs 36,345 and Rs 36,845 a quintal, while Dec declined by Rs 105 to Rs 37,380 a quintal.

Total turnover moved up by 10,631 tonnes to 37,282 tonnes. Total open interest moved up by just 47 tonnes to 11,995 tonnes.

Spot prices shot up by Rs 800 during last week to close at Rs 34,200 (ungarbled) and Rs 35,700 (MG 1) a quintal on strong demand amid tight availability.

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