Comexes' pepper stock flows into spot mart

A chunk of the invalid stock of black pepper with three major commodity exchanges is pouring into the spot market, thanks to a rising demand for the spice in the coming winter season.

Invalid stock refers to those inventories that do not meet the specifications of futures contracts.

The average Indian will now get a chance to taste the world-famous pepper grade, Malabar Garbled 1, popularly known as MG1, courtesy the movement of the stock from the futures to the spot market.

According to information available, the three exchanges have around 8,000 tonnes of valid stock and over 5,000 tonnes of invalid stock. With the farm-grade pepper meagre in supply in the spot market, its demand is being met through the MG1 stock with the exchanges. According to leading traders, for the last nine weeks, the non-availability of pepper in the spot market has led to exchanges making their stock available for the spot trade.

Last weekend alone, 250 tonnes of the exchanges' stock found its way into the spot market, trading at Rs 11,900 a quintal. The Indian Pepper and Spice Trade Association's rate for the ungarbled pepper in the spot market is the base price for such trading.

According to a leading trader, Rs 6-7 a kg is needed to reprocess the invalid stock to make pure MG1 grade. But selling the stock in the spot market, even at a lower price, is a profitable exercise rather than revalidating it.

Meanwhile, experts see a northward movement of prices, thanks to the winter season demand, even though the foreign demand is weak. A delay of 4 to 6 weeks is expected in the arrival of the new crop due to heavy rains. The new crop will hit the market only by the end of December, according to them.