FMC to raise pepper position limit

Exporters say the delayed move not to benefit much

Forward Markets Commission (FMC) is likely to raise the position limit for black pepper. It is learnt that the near-month position will be raised to 500 tonnes from 170 tonnes, and a notification in this regard is expected either in the current week or by the early next week. The total limit for all contracts may be raised by 500 tonnes to 1,000 tonnes.

The move may be in line with market movements but exporters are not happy. According to leading exporters, FMC's delayed move may not have much impact on exports.

The commission had lowered the position limits in May this year to regulate speculation in pepper futures. But the decision had badly hit the exporters as they were unable to hedge the stock and undertake huge overseas orders.

In the last 4-5 months, the Indian pepper prices were the lowest across the world, but exporters could not encash the price advantage due to lower position limit.

The country exported only 20,000 tonnes pepper during the April-October period, but more than 30,000 tonnes could have been shipped if position limits were raised on time.

Meanwhile, black pepper exports from the country may witness a jump in the next few months as stocks in other producing nations are shrinking and prices there are moving northward. Traditional buyers such as Australia, Spain, Poland, Italy and Japan have already placed orders for 500 tonnes.

In Vietnam, the prices are ruling at $3,635 a tonne (fob HCMC) level, while in Indonesia, they are around $3,500 (fob Panjang). In comparison, the current Indian tag is $3,475-3,525 (fob Kochi).

Only Brazil is offering lower prices at $3,250-3,300 (fob Belem). Both Vietnam and Indonesia have limited stocks. According to exporters, Vietnam will have 15,000 tonnes in stock by the end of November 2007.

Meanwhile, a slight delay is expected in the arrival of fresh crop in India. The arrival is expected to be in full swing by mid-February and this may squeeze the stock position further.

Domestic seasonal demand is currently high and all the market parameters, domestic and international, signal towards a reasonable appreciation in the prices in the next 8-10 weeks.

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BREATHING SPACE

The commission had in May this year lowered the position limits in order to regulate speculation in pepper futures

Exporters could not cash in on the price advantage due to lower position limit

The total limit for all contracts could be raised by 500 tonnes to 1,000 tonnes