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At a time, when leading national commodity exchanges are eyeing pepper futures, traders and other stakeholders have expressed apprehension about participating in existing and new pepper contracts.
Recently, the National Commodity and Derivatives Exchange Ltd (NCDEX) once again reiterated its plans to relaunch its pepper futures contract, which was suspended in 2012-2013. The exchange is awaiting regulator SEBI’s approval for relaunch of the contract.
NCDEX officials claimed that when active in 2012, the Pepper contract had touched ₹500 crore in daily turnover. But an adulteration issue cropped up and as a result, food safety authorities sealed 6,800 tonnes of pepper, of which 400 tonnes were found adulterated, after lab tests.
Bitter experience However, there are arguments against pepper futures, with stakeholders, including traders and exporters, keeping a safe distance from the futures on the multi-commodity national exchanges after a bitter past experience.
Even as NCDEX plans to relaunch the contract, the National Multi-Commodity Exchange of India (NMCE)’s pepper mini (of 100 kg) contract is getting a dull response from participants. April Pepper Mini recorded turnover of just ₹6.12 lakh on Wednesday as against the total gross turnover of ₹300 crore for the Exchange.
NMCE sources revealed that after prices shot up significantly over the past two-three years, members demanded modifying the size of the contract from one tonne to one quintal, requiring a lower margin and enabling the smaller traders to participate.
“Small people are participating, but the volumes are not there. People are still afraid of the past experience. The fear is about delivery and the subsequent possible action. This is discouraging members from participating in futures. It will pick up in due course, but will take time,” said a source at NMCE.
Started in 1955 under the India Pepper and Spice Trade Association (IPSTA), pepper futures were primarily used as a tool for farmers to understand the trend of the market and take an informed decision on whether to liquidate or hold their crop. Initially, the quantities traded were 300 to 400 tonnes a day, with peak volumes touching 750 tonnes.
After IPSTA, Ahmedabad-based National Multi-Commodity Exchange of India Ltd (NMCE) was granted pepper futures contracts, followed by MCX, which failed to garner larger volumes due to its non-agri focus.
Feasibility question Against this background, questions are being raised as to whether there is a need to permit more commexes to launch futures trading in pepper. Pepper traders from Kerala claim that cartels pushed up pepper prices from June 2012, making Indian Pepper non-competitive in the world market.
Prices moved up from ₹275 a kg to ₹425 kg. Four years on, pepper prices are hovering at around ₹612 per kg in the futures on NMCE.
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