G.K. Nair

Kochi , July 23

Pepper futures could witness a firm trend this week with the supply position continuing to be very tight. In fact, "genuine shortage is now getting exposed", according to market sources.

Overseas buyers are asking for offers but the exporters are not in a position to make firm offers.

According to traders, production in Indonesia and Brazil this year is likely to be less than that of last year. The total world output is likely to be significantly lower in 2006. This phenomenon is also influencing the market. Some of the players having sales position are buying back, anticipating that the market may go up. This has activated the bulls to push up the prices.

Speculative buying

Pepper prices shot up last week in futures market on speculative buying, continuous tight supply in the international market and reports of significant fall in world output. Reports of Brazil quoting higher for its new crop, which will hit the market in September/October, at a time when it was reportedly offering nearby positions at $1,550-1,600 a tonne f.o.b also influenced the market. Brazil said to have offered October/November/December at $1,800 a tonne c&f. Normally, its price used to be $100 below the prices of other origins because of "salmonala problem", according to market sources.

Indonesia is offering at $1,900 a tonne (c&f), while Indian parity is at $1,950 a tonne (c&f).

The increase in futures prices on NCDEX last week (July 15 - 22) for all positions was from Rs 675 to Rs787 a quintal, while on NMCE it was from Rs 687-798.

The August contract on NCDEX shot up by Rs 414 a quintal to Rs 8,644 from Rs 8,230 on Friday, while on NMCE, it soared by Rs 451 a quintal to close at Rs 8,675 from Rs 8,224.

The increase in other positions was from Rs392 to Rs453 a quintal at NCDEX, while on NMCE, it was from Rs 382 to Rs 448 a quintal.

The total turnover on NCDEX increased by 8,074 tonnes to 17,230 tonnes from 9,156 tonnes on Friday. On NMCE, it increased by 1,100 tonnes to 2,688 tonnes.

The total open interest on NCDEX on Saturday was 17,063 tonnes compared with 17,033 tonnes, while on NMCE, it was 3,455 tonnes as against 3,385 tonnes on Friday.

The outstanding position for August, September and October on NCDEX was 6,941 tonnes, 3,473 tonnes and 4,360 tonnes respectively.

In tandem with the rise in futures market, spot prices also shot up by Rs 300 a quintal to close at Rs 8,050 (un-garbled) and Rs 8,450 (MG 1) on Saturday. Compared with the previous week close, the increase in spot prices during the current week was Rs 700 a quintal.

According to a report from the International Pepper Community (IPC), the market is showing a bullish trend. Prices at most origins have improved as a clear picture has emerged on short supply during the second half the year.

During the last three years, production of pepper has declined steadily as a consequence of continuous price declines during the last six years. At Kuching, local prices moved up from Malaysian ringgit (MYR) 6.16 per kg to MYR 6.40 at the week's close. Compared to last week, the price again increased significantly by 7 per cent at the local market and 4 per cent for f.o.b. In Lampung, the market reacted to the bullish news, although the crop this year is approaching. During the week, producer price was Indonesian rupiah (IDR) 12,000 a kg for unprocessed black pepper. Price increased sharply by 11 per cent from the previous week. It is reported that the market in Vietnam remains firm, but prices prevailing at HCMC were not available. At Daklak, prices of raw material increased from Vietnam dong (VND) 21,500 to VND 22,500 a kg.

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