India - Pepper competitive in global market, as futures fall

Indian pepper has become competitive in the international market at the weekend following sharp fall in the futures market engineered by bearish operators whose propaganda led to heavy liquidation by bulls of June delivery Saturday.

If the June delivery is taken as the base price, Indian parity in the international market was at $3,750 a tonne (c&f) which is at par with the Indonesian price. However, since the other origins are closely monitoring the futures market here, there is a possibility that Indonesia might reduce its price to quote below the MG 1 price.

According to an overseas report on Saturday, Vietnam and Brazil were not showing any interest to sell while Indonesia was presenting “intermittent new crop buying opportunities, but also in a less than aggressive manner. Continued concerns about the world financial markets and exchange rates are probably holding back activity, more than the overall market sentiments. In sum, both buyers and sellers are playing their cards very close to their vests”.

A short supply in the world market is predicted for the current year. Vietnam pepper Association (VPA) was quoted as saying that “pepper production had decreased by 10 per cent for the year and the main cultivation area Binh Phuoc province production estimation showed a fall of 30-40 per cent”.

Meanwhile, the International Pepper Community (IPC) has reportedly projected the carry over stock of pepper to decline by 32 per cent this year to 79,124 tonnes. Indian production has not been growing corresponding to the rise in consumption and as a result, there is a mis-match in demand and supply leading to increased imports for value-addition and re-export.

In April this year imports stood at around 2,150 tonnes as against exports of around 1,250 tonnes. Growers have alleged that part of it might enter the domestic market to depress domestic prices. The June, July and August contracts fell sharply during the week by Rs 850, Rs 895 and Rs 778 a quintal respectively to close on Saturday at Rs 16,405, Rs 16,600 and Rs 16,810.

Turnover
Total turnover moved up by 807 tonnes to 50,231 tonnes. Total open interest also went up by 226 tonnes to 16,689 tonnes. In fact, 960 tonnes of June were liquidated on Saturday alone on bearish activities. Bear operators spread a propaganda at the weekend that 13,240 tonnes are the net open position for June and nearly 4,000 tonnes would be available for delivery at the exchange platform when it matures on June 20, after 17 working days.

Add to this, as the “Badla” has narrowed down as sellers were not interested in switching over, and that was also used as a tool to floor the market on Saturday, market sources told Business Line.

Meanwhile, pepper from Sakleshpur, Chickmagalur areas in Karnataka was being offered at Rs 155 a kg delivered anywhere in the country and its availability in northern Kerala made a negative impact on the market here.

At the same time trading sources in Delhi said there it was available at Rs 152 a kg. All these bearish information aided the futures as well as spot prices to fall. Spot prices during the week fell by Rs 600 to close at Rs 16,000 (MG1) and Rs 15,500 (un-garbled) a quintal.

In the international market everybody is on a wait and watch mode as prices at all the origins were firm. The IPC report for the week said the black pepper market continued to remain volatile. Currency fluctuations at most origins have had influenced the situation as well. Local prices at origins were reported to have increased. In dollar terms however, it was down due to weakening of their currencies against the US dollar. In Vietnam, local prices of black pepper increased almost daily to reach VND 56,500 a kg on Thursday from VND 54,500 on Monday. Fob prices increased to $2,875 a tonne for black 500GL from $2, 825 at the beginning of the week.

In Lampung and Sarawak, also prices increased. It was reported that fob price in Brazil stood at $3,175 a tonne for black 500GL during the week.

WHITE PEPPER
White pepper prices at most origins increased further. In Sarawak, local price also increased, but in dollar terms, prices fell down by 2 per cent.

From The Hindu Business Line...