Curbs on positions fuel volatility in black pepper

Black pepper futures on the National Commodity and Derivatives Exchange (NCEDX) ended higher in a volatile trade on Wednesday following the Forward Markets Commission's (FMC) restrictions on position limits.

Market buzz over manipulation by a few traders led to panic selling, with prices of all the contracts dropping by an average of Rs 400 a quintal. But, towards the end of the day, traders, taking advantage of lower prices, bought heavily, which led to a market rebound.

The near-month contract on the NCDEX opened at Rs 13,685, dropped to Rs 13,186 and recovered to close at Rs 13,950 a quintal. The July contract, which opened at Rs 14,190, also dropped to Rs 13,600 and ended stronger at Rs 14,480 a quintal.

The FMC recently introduced stiff norms to curb unhealthy speculation by limiting individual trader positions to 100 tonnes for the near-month contract and 500 tonnes for the other contracts. However, traders are in a fix and have been complaining that the norms restrict them from hedging larger quantities.

"The FMC is really helping market manipulators and destroying genuine business. Why is the regulator not controlling intraday speculation in an effective manner? Instead of doing that, the FMC is restrictive the positions of traders and killing genuine exporters and other stakeholders," said a broker on condition of anonymity. The market was today abuzz with reports of a major business house, having offices across the globe, planning for a big purchase in Vietnam to bring down the Indian prices and strike the Vietnamese market too.

Meanwhile, Vietnam, the world's largest producer of black pepper, kept the prices almost steady at $3,600 for 500 GL, $3,700 for 550 GL and $3,850 for ASTA a tonne each. India is the lowest destination for importers as the country is quoting an average of $3,750 a tonne.