Pepper futures move northward

The black pepper futures market moved north today as overseas enquiries increased, especially from the US, Europe and Canada. By noon, all the contracts appreciated by Rs 300 a quintal on an average following affirmative reports on overseas buying.

Major global buyers have once again become active in the Indian market because of the current lower tags. In the morning session, the near-month contract appreciated to Rs 13,100 a quintal from the Wednesday's closing rate of Rs 12,899.

The current buying strategy adopted by the foreign companies is to place orders when the prices touch the lower level in the near-month contract. This generally happens between the 10th and 20th of every month.

But as the market touched Rs 12,600 on Wednesday, overseas buyers stepped in and the market has entered a temporary bullish phase.

The highly volatile contract market had upset pepper growers and exporters on Wednesday, with the price of the near-month contract falling below the spot tag.

The movement of the Indian futures market over the last 4-6 weeks had confused overseas buyers and affected the Indian exports. Whenever the Indian markets had appreciated, the overseas demand had fallen as importers waited for the market to move south. According to leading Kochi-based exporters, the European and the US buyers had withdrawn from the Indian market for a long time as the price variations in the futures market were giving wrong signals to the global mart.

A leading trader told Business Standard that the actual cost for producing 1 kg of MG1 grade was Rs 136 based on the spot tag of farm-grade pepper, but the August contract was quoted at Rs 126 on Wednesday.

The Indian tags had dropped to $3600 a tonne from $3650 - $3700 last Friday.