Assocham asks FMC to probe the unusual price changes and trade behaviour in black pepper futures

KOCHI: The apex industry body The Associated Chambers of Commerce and Industry of India ( ASSOCHAM) has urged the regulator Forward Market Commission to investigate the anomalous price changes and trade behavior found in pepper futures between June 2011 and March 2012.

The investigation has been necessitated as the just concluded study undertaken by the chamber has pointed out insider trading by the cartel leading to un-noticed price manipulation and huge suffering especially to farmers.

The chamber secretary general D.S. Rawat while releasing the study said, "the commodity exchanges must develop a regular system of monitoring price and trading behavior of commodities in order to avoid such episodes in future as even the cases of suicides have come to notice".

The chamber study observed that the average price of black pepper Rs. 7,181 per quintal in 2004-05, almost doubled in 5 years reaching Rs. 13,748 in 2009 - 10. However, in 2010 - 11, the average price stood at Rs. 20,231 per quintal and rose further to Rs. 32,803 per quintal in 2011 - 12.

The maximum price went up from Rs. 25,053 per quintal in Rs. 2010 - 11 to Rs. 45,005 per quintal in 2011 - 12. The price fluctuation in 2011 - 12 is also extremely high with a price range (different between maximum prices) of Rs. 19,563 for the year, as compared to the range being less that Rs. 6,000 till 2009 - 10.

Black pepper futures market exhibits average price changes (returns) and volatility in 2011 - 12, which is within the range of figures recorded in market history while, average price and returns have been stable, volatility has slightly gone up in 2011 - 12.

The distribution of price changes / returns in 2011-12 suggests informational inefficiency which may possibly be exploited by insider traders.The trading volume has remained static in 2011 - 12, while open interest has improved marginally.