Pepper’s now too hot to handle

MUMBAI: Pepper zoomed on the NCDEX, breaching the 4% upper circuit across all contracts on anticipation that export orders would start flowing in after the first week of January. The near month pepper contract ended up 4.2% at Rs 10,531, while the February and March contracts were up 4.3% and 4.2% at Rs 10,741 and Rs 10,956 per quintal respectively.

Said Viral Bhammer of Krishna & Co, exporter and one of the major arbitrageurs of black pepper in the country, “A lot of speculative buying due to technical bullishness has been the primary cause for the price rise in black pepper.” Along with this technical bullishness, said Mr Bhammer, there has been good amount of upcountry demand from the Delhi, Bihar and UP sector.

Traders expect the pepper crop for 2006-07 to be 22-25% lower than last year’s crop of 50,000 tonnes because heavy rains in May-July are said to have affected pollination of the spike (stem). Furthermore, unperfected and continuous rains in October-November impacted the maturing of berries and hence delayed arrivals.

Spot market buyers say hardly 10-20 bags (each of 50-70 kg) have been arriving at Kochi from the southern districts of Thiruvananthapuram, Kollam, Pathanamthita and Allappuzha. These, they say, are being auctioned at 70-75 per quintal as they are heavily moistured. The normal rates for the less moistured berries would be Rs 95-100 per kg.

“Arrivals which should have started by October-November have been delayed to end-December/January as unpredicted and continuous rains delayed the maturing process of the berries,” said Kishor Shamji of Kishor Spices Co in Kochi.

Mr Bhammer said that arrivals to the spot market have been just 30 metric tonnes in an entire week. Since the crop of Vietnam is expected to materialise only in March importers will look at the Indian markets to meet demand till then. This could firm up prices further, market participants feel.

Since there was very little spot pepper available for the last couple of months in the terminal markets, exporters had been picking up from the futures markets at a Rs 7 per kg discounted rate of Rs 88-105 to the spot market, said a trader.

He added that quality concerns on the NCDEX in October-November meant that futures prices started falling and this in turn sparked off a spree of shorting which led to futures quoting at a discount to spot rates. Earlier speculators bought on the spot markets and delivered on the futures to earn vyaj badla or interest. Prices fell form Rs 15,000 levels to Rs 9,000 levels.

Mr Bhammer says, “even though arrivals started about a month and a half late prices did not rise much as exporters were buying from the futures markets. Around 13,000 tonnes of last year’s crop has reportedly found the way to the exchange warehouses.