With record low level of physical stocks at the warehouses of the National Commodities and Derivatives Exchange (NCDEX) and exporters’ coverage in the near month January contract being double of the available stocks, defaults in delivery are imminent in pepper futures trading.
It is learned that the total valid stock with NCDEX is 807 tonnes while the coverage by leading export houses is around 1,500 tonnes. Sources close to these exporters told Business Standard that delivery should be insisted this time as the availability of pepper is too low in the open market due to various reasons.
Three leading exporters have positions of more than 800 tonnes for January contract and for them delivery is imminent. So there might be a serious crisis in the futures trading of pepper unless an appropriate solution is evolved to the delivery issue of the near month contract.
A top official of a leading commodity broking firm told that sellers can go away by paying a meager penalty of 2.5 per cent but the buyers are going to be pushed to the wall with the availability of farm level pepper being too low for the last 6 months.
Although there is stock with leading traders of Idukki and Wynad districts of Kerala, but they are reluctant to release it as they prefer a price tag in the range of Rs 13,000 -14,000 a quintal. Upcountry traders buying invalid stocks lying in the terminal markets for their daily dispatches to north India and lower production are affecting the fresh season’s harvest in a big way. It is not viable for farmers as even after paying 50 per cent of the produce to workers, labourers are not willing to accept the offer asking for more.
According to growers many farmers are now allowing the pepper corns to ripe and fall from the vines. The fresh season’s arrival is very low thanks to unattractive price tags even in the midst of a supply crunch.
According to Jojan Malayil of Bafna Enterprises, the country’s largest exporter, the only way to stop the closure of trading in the exchanges is by increasing the penalty from the current level to 25 per cent. This is the first thing the exchange and regulator should do, otherwise pepper futures will have the same plight as that of chilli contract which is currently traded at less than 500 tonnes, he said.
The balance of invalid stocks which is currently available is not even enough for 2 weeks as this is the prime consumption season which will last up to February end or early March.
One of the national exchanges has already started feeling the heat with around 200 tonnes of valid stock and virtually no trading happening with participants staying away.
