For pepper traders export's past tense, but futures perfect
When one door closes, another opens. This could be very true for some of Kerala’s big pepper traders who have been straddled with huge stocks following lack of export orders.
By Ram Sahgal, TNN |
MUMBAI: When one door closes, another opens. This could be very true for some of Kerala���s big pepper traders who have been straddled with huge stocks following lack of export orders.
With the export order route drying up, says a trader based out of Kochi, exporters have given delivery on the futures exchanges and earned handsome returns. On Tuesday itself one exporter sold 200 tonne out of the 700 tonne he had bought from NMCE in January at Rs 92 per kg for Rs 129-131 for March delivery on NCDEX, earning Rs 39 per kg over three months. He had been sitting on the stocks hoping for export orders, which did not materialise.
The trader said Indian export rates for February shipments were not competitive at the current $3,100 per tonne for Asta variety against $2,750 fob Ho Chi Minh for Vietnamese Asta variety. For the 550 gm grade, Ho Chi Minh fob was $2450 and for the 500 grade $2280 per tonne, said the exporter.
The exporters have benefited by the rise in futures prices on the commexes. For instance, the near month pepper contract on NCDEX has risen by 15% in a month at its Rs 12,605 per quintal close on Tuesday. Similarly, the March contract has risen 14.6% at Rs 12,816 per quintal.
Ironically, the speculative rise in prices has opened a window of opportunity for exporters who were critical of the rise in futures prices ���even as fundamentals did not merit such a rise���. They have all along maintained that Kerala���s pepper growers were holding back stock after looking at the futures rates. This has been one reason why arrivals at the terminal markets are negligible, at just 15 mt over the past two weeks in the Kochi terminal, says one trader.
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A client of Viral Bhammer of Kochi-based Krishna & Co, an arbitrage facilitator, bought NCDEX fresh deliveries of MG-1 (50 mt) from the spot market at Rs 125.50 per kg and simultaneously sold the same at Rs 129 against the March futures contract on the NCDEX, earning a return of over 15% per annum on an investment of Rs 135 per kilo after factoring 4% VAT and 6% exchange-levied margin.Taking Tuesday���s spot rate of Rs 128 per kg at Kochi market, an arbitarge opportunity presents itself against the April and May contracts, which on Tuesday were quoted at Rs 131 per kg and Rs 133.9 respectively at close of trading. This would translate into a gross rate of return of Rs 9.3% and 13.8% respectively.
Traders estimate the Indian pepper crop at 50,000 tonne this year while the Vietnamese crop is expected to be 1 lakh tonne. Last year, said an exporter, IPC had projected Vietnam���s pepper crop at 80,000 tonne, the country ended up exporting 1.17 lakh tonne and subsequently revised production estimate at 1.15 lakh tonne.
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