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Pepper dips despite fears of output fall

Strong carryover affects futures trading as well

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George Joseph Kochi
Last Updated : Feb 15 2013 | 4:55 AM IST
The anticipation of a drop in pepper production during the next season worldwide, especially in India and Vietnam, has not impacted the domestic pepper market positively. Rather, to the growers' dismay, pepper prices have been on a downturn for the last week.
 
The city's exporters said the prices might just further plummet since there is no effective demand globally, and the market, in fact, is mainly riding on the swings in the futures trading. Physical trading in black pepper has been rather low even though two major futures exchanges have registered good volume.
 
An exporter said the warehouses of Ncdex alone have a stock of 1,500 tonne pepper, but the delivery of the product is rather low. He said this is not at all an encouraging sign, and there would not be any steep rise in the prices as expected earlier.
 
The carryover position (of the stock) in the domestic pepper market is very strong, and International Pepper Community estimates the total stock to be around 40,000 tonne. According to the trading community, stock should be somewhere between 50,000 tonne and 60,000 tonne.
 
Until last week, futures trading saw an upward movement anticipating an acute shortfall in production. But the stock position influences futures trading too. So, there has been a drop in both the volume and the prices in futures during the last week.
 
The volume dropped by a whopping 4,551 tonne within seven days at Ncdex. On December 19, the exchange had registered a total volume of 6,649 tonne in January contract, which has plunged to 2,098 tonne on Monday. There has been a steady drop in prices too. January contract, which had closed at Rs 7,597 a quintal on December 19, has come down to Rs 7,233 a quintal yesterday. The price has further dropped to Rs 7,134 a quintal today.
 
At NMCE, January contract price has today dropped to Rs 7,099 a quintal from Rs 7,329 a quintal on December 19, and there has been a similar fall in other contracts, which extend to June 2006, as well.
 
At NMCE, the prices have, on an average, declined by Rs 100 a quintal. February 2006 quoted at Rs 7,200 a quintal, March Rs 7,457, April Rs 7,585, May Rs 7,770 and June Rs 7,851.
 
Ncdex registered Rs 7,385 a quintal (February), Rs 7,595 (March), Rs 7,800 (April), Rs 7,910 (May) and Rs 8,005 (June).
 
Traders said it is the futures market which controls the trade now and spot prices are rather irrelevant for the time being.
 
Meanwhile, India's export prospects have received a jolt with the price difference between India and other export nations being $150-250 a tonne. Currently, markets worldwide remain rather dull as importing nations are not showing urgency in procuring pepper.
 
With pepper available round the year, importers now feel there is absolutely no point in importing at higher prices.
 
Vietnam has reduced prices to $1,270 (500 gm/litre), $1,360 and $1,500 for ASTA grade. Brazil offers B1 ASTA for $1,325-1,350 while Indonesia is trading at $1,400-1,425.
 
On parity, Indian pepper is priced at $1,650-1,675. Thus, the country is virtually out of export contention for the time being.
 
Meanwhile, new crop has hit the terminal markets and fresh black pepper is quoted at Rs 6,150 a quintal.
 
The city traders said on an average 20 tonne pepper is reaching the market daily. Kerala State Co-operative Marketing Federation, which had already sold 1,600 tonne at the rate of Rs 7,100 a quintal, has invited tenders for the third round of sales.

 
 

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First Published: Dec 28 2005 | 12:00 AM IST

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