Are Bears Back???

It was last Saturday of July 2009 when a report from US renowned broker was sent to the spices traders all over the world.

But this time it had something special, good news for pepper sellers.

The report really made everything active.
The buyers started writing emails, short messages and phone calls to the origin sellers.
Consequently on Next Monday there was a surge for usd50-75/mt in Vietnam.
But the activitiy was not abnormal throughout the week.

In the meantime an unauthenticated report was published in a Vietnamese paper claiming that VPA has advised the exporters not to sell pepper at the current levels and the price might touch usd5000 in last months. They also mentioned that top ten Vietnamese exporters had decided to hold the goods and they got support from a consortium of banks.

The articles contents were not at all logical and it seems that it was published by some people having interest in bullish market.
At the same time Brazilian crop size was re estimated and figure was down sized. Indian players became active and they told that lesser monsoon rains could affect pepper crop in India. It made exchanges highly active and the speculators started pushing the prices on minutely basis.

These all factors were enough to make market crazy.

The buyers started chasing sellers on last Monday and it continued till Monday 10/8.
Origins increased prices on hourly basis. On Monday 3/8 the price for FAQ 500g/l was usd2300 fob and touched usd2600 on Friday.
Friday evening the packers and farmers thought that it was not useful to sell pepper as every day its price was increasing, so they finally decided not to sell.
On Saturday there was very tight position and pepper buyer was chasing the suppliers and they were getting the responses NO PEPPER IN VIETNAM,NO OFFER,FARMERS NOT SELLING, etc etc.

Surprisingly we received a call from a big supplier from Vietnam offering usd2600 fob.
As per our experience this type of call like: One of our supplier needs money that’s why he is selling at lower level: has definitely something wrong means sign of bearishness.
We though that the market will loose momentum on coming Monday. But our guess failed and on Monday 10^th of August there was huge upsurge in the price and people started asking usd2950 fob, most of the sellers were not offering. It was really a big shock for the buyers who were waiting for the market to come down and had not taken the positions.
It was also worrying the people who had confirmed at lower levels and had doubts for default.

But Tuesday 11 Th August proved that it was the climax of the drama and 33% upsurge just in two weeks was not a joke.
The price was down by usd200-250/mt and many exporters were calling to say hello hi and were eager to sell. Vietnam market for FAQ was usd2650-75 again.
We think people paid attention to the VPA statement that Vietnam had 25000 mt in hand till the new crop 2010 enters the market. They totally denied the contents of the article published in Vietnamese Paper citing VPA.VPA predicted the prices at the current levels or there might insignificant upsurge in coming days.

Now the question is what’s reality? Why the prices became so high and in such a short time and what’s the possibility in coming days? Is the trend starting on Tuesday a mere profit taking, a correction or the time for bears to dance?

Though it’s a difficult question but if we see supply and demand situation and other factors like crop’s delay in Brazil, Vietnam new crop’s time and relatively thin stocks there, uncovered big buyers in US, the word Correction best suits the situation. The market behaved in abnormal way last week and there was a price surge of 100 or even 200 and 300 usd leaving a gap which must be filled before the next Bull Run.

Muhammad Asif Qureshi

Dynamic International Traders

Pakistan.
asifq82@hotmail.com