Indian Black Pepper futures likely to crash as farmers decide to Start selling Spot Cargo

OPINION by Sham Nair


Kochi/Mumbai/New Delhi 09 March 2012

Indian Black Pepper futures which increased 40% in less than three weeks with heavy speculative activities by non pepper traders who hand in glove with the exchange and the commodity regulator manipulated the pricing of Black pepper seems to have exit the market transferring the load to retail investors mainly is likely to crash in the coming days .Of course there is a shortage of production of Black pepper in the country but the sharp rise in just 18 days is a case of sheer manipulation according to industry stalwarts. Vietnam the worlds largest producer and exporter is offering Rs 100/- kg below the Indian Pepper prices and still not finding buyers or rather attracting buyers in the European Union and North America who claims to have sufficient stock to cater their needs till June and not in a rush to buy even after seeing the wide difference in pricing . The importers feel that the prices in Vietnam still have to drop another 10% to make it attractive for them and the freak Indian situation is completely discounted by them.Indian futures its matter of time is going to fall like nine pins said a major importer who alone buys 20% of North American requirements .

With multi origin multinationals deciding to deliver the Valid stocks they received in the February deliveries back in March and the validity expired stocks received in February by some of them is reprocessed and deposited in the exchange platform another 3000 mt pepper will be offered for March deliveries this time as most of the traders would like to have a clean book as its the financial year ending for all in the country there are every chances the futures delivery in India nose diving in the coming days and might move back to Rs 360 per kg from the present 439 /kg for April deliveries according to pioneers and veterans in the trade.

With the very wide gap between Indian and Vietnam pepper the value added processors who left the import front a year ago are back with full vigour and before the end of the month about 1000 mt of black pepper is likely to reach in Mumbai/Chennai ports besides Cochin .

In the meanwhile with lack of export orders in hand many Vietnam companies are offering shipments for April and May at a discount is raising the eye brows of many as its heard the flows of new crop is in full swing prices are likely to drop in Vietnam in the coming days by 10,000 VND per kilogram ( usd 500 pmt )



Sham Nair

PEPPER - A MODERATE VIEW

Dear Sir
Good day
Please publish this article.
Best Regards
Quote
Dubai
19/01/2012
International Pepper maket starts showing some signs of life Thanks to report published in the "Vietnam News" 19/01/2012.
The report is self explanatory claiming that Vietnam shall export only 86000 MT of Pepper in year 2012-a 30 pct decrease in production.The reason explained behind this claim is the death of old plants.
It seems very strange that In November 2011 Vietnam Pepper Association has presented his figures upto 110000 tons which itself was objected by independent sources and traders in Lambok.Many reliable sources are of the view that pepper production in Vietnam is not less than 135000 MT for 2012 crop.
For last many weeks pepper has been the most silent spice.In year 2011 Vietnam new crop started @usd4200 fob and comlpeted the upward journey till 8400. exactly double.Then started coming back and stopped at 5500 last week.People were thinking that the price could touch usd5000 or even lesser but some immediate demand before TET holidays and this report has suddenly pumped bullish sentiments in the market.
Even the cheapest market Dubai has improvment that had already reached 5200 level this week.
Will it continue.Thats a question?
If we check some years history its evident that people stops shopping 3-4 months before Vietnam new crop arrival and after Tet holidays when Vietnamese resume their business activities thay see a lot of demand and immediately raise the prices.This year the story is not much different but with one change.Consuming markets are not not empty.Middle east and even Europe has pepper.Though the traders are showing reluctance in releasing the high priced cargo but its the fact pepper is there unlike last year.
People need to show some patience in their shopping if they want to make market suitable for all the stakeholders of the industry.If they trust in baseless reports and rumours ,it will repeat last years result .Defaults for low priced contracts and losses in high priced goods.
We shall have to see fundamentals too.
1-The supply for 2012 is not meagre.
2-There is no supply demand mismatch for pepper in 2012.
3-Economic conditions in Europe and all over the world are not remarkable.
4-All other agriculture commodities and specially spices have been travelling fast to South.Like Cardamom has 75 pct drop .In the same way cloves 50 pct,Cummin 30 pct .In other commodities Rice ,wheat,sugar all have lost much.
So one must be careful in giving bids.

Thanks and best Regards
Muhammad Asif Qureshi
General Manager
Commodity King Traders LLC
Nuts & Spices Agent
Member
INC(International Nut &Driedfruit Council)
CENTA(The Combined Edible Nut Trade Association,UK )

Sham Nair: M&M Disturbs Indian Pepper Trade

Kochi/Mumbai/New Delhi /10/ 01 2012 02 HRS IST

Muscle and Money Power play by non Pepper operators since last Nine months is disturbing the Indian pepper trade according to cross sections of the trade from various parts of the country.
Mr Lukose Mathew of Kottarakara a leading collector from various farmers said that he is getting out of the pepper business which he was doing since last 30 years as he cannot afford to loose any more as the recent volatility created by non pepper operators are forcing traditional pepper players like him to exit the Business. We have to buy every day whatever the farmers bring and it will take two weeks to collect 3mt or 5 mt quantity and currently in three trading working days the futures market is pushed down by Rs25/- Rs 30/- kg making it impossible for me to turn around the stocks as once the futures drop the exporters completely withdraw and doesn't even quote any prices still the market stabilises and they even don't buy when the market moves up drastically.

The current scenario in India is ,from 65 exporters in the 1980's the number has shrunk to very few whom you can count down finger tips and they are all very seasoned and none of them play short and doesn't get excited when the market goes down or up and doesn't care what the speculative groups do. According to a senior Manager of a multinational company the excessive speculations are happening with the blessings of the exchange authorities and the toothless watchdog with blind eyes.

Its high time the Government of India brings the commodities also under the securities watch dog SEBI which is performing a wonderful job in this country and shut down the commodities watch dog Forward Market Commission.

Mr Kunal Shah a trader from Nagpur said he is trying to keep away from spices in which futures Gambling Licence is given in India.
When there is a free flow of the spice the prices are pushed up unnecessarily and when its supply is tight the futures are pushed down drastically and certain times even Rs 20/- 30/ Kg than in tandem price discovered by special experts of spot raw pepper sitting in the alley of old spice market Jew Town in Cochin.Some of the experts say its Circular trading happening in the exchange by a group who has cornered the commodity and some others say its the exchange itself playing the market up and down and triggering stop losses to show the inflated turnovers in the exchange.

The India Pepper and Spice Trade Association the pioneers in the futures trade of Pepper for fifty years conducted it very beautifully and systematically and the exchange itself had the tools in hand to control money and muscle play but with the entry of national exchanges it got buried and has become a part of the history due to the vested interests of a very few orthodox traders.

The traditional small, medium and large pepper traders have lost interest in the system and is keeping away from the activities of the unregulated futures trade in the country where Muscle and Money are in play with the blessings of the exchange and its watchdog.

Meanwhile in the last 16 days future delivery prices of January contracts have fell by Rs 56/-kg and the in tandem discovered price of raw pepper by Rs 38/-kg and the cheapest origin of Black pepper in the world India has become more cheap but the expected volumes are not happening is one thing which has to be investigated in detail as the manipulators/operators are playing with 5000 mt of spot pepper which is not even the volumes of 2 major exporters in a month from Vietnam and which can suddenly change hands to smart exporters there by putting an end to the power play.

Some Biz was done to North America on Friday and Monday with prices becoming very attractive for January and February shipments in the usd 2.95/-3.05/lb range and more buying interest is seen at usd 2.90/lb range for February shipments by Giant buyers who may runaway if the Indian futures market is lowered further in the coming days.

Cloves soar on supply squeeze

G. K. Nair
Kochi, Feb 27
Cloves prices have shot up in the Indian and international markets on severe shortage caused by crop damage in several producing countries.



Trade sources told Business Line that there were buyers for Colombo cloves at Rs 375 a kg. The prices in Colombo have risen to $7,500 a tonne from $6,200 a tonne and “it is on the rise as days pass by”. If the current trend persisted the price might cross $8,400 a tonne, they claimed.

Severe shortage in India is forcing buyers to cover from Colombo at the prevailing prices. The advantage for the Indian importers is the four per cent import duty, they said. The prices for other origins such as Zanzibar and Madagascar are at $7,000 a tonne and it will become costlier as the import duty is at 35 per cent, they said. Zanzibar, Madagascar and Comoros cloves prices would come to Rs 425 a kg at present, they said. The crop in Indonesia, the biggest grower of cloves in the world, has reportedly failed due to unfavourable weather.

The “cigar companies will need 25,000 tonnes, and there is not so much cloves available in any of the origins”, they said.

Indian production of cloves continued to remain negligible when compared with the demand and if the country were to become a net exporter of the commodity from its current status of a net importer, the State and Central governments and the Spices Board would have to provide special emphasis to promote its cultivation. The output continued to vacillate between 1,000 tonnes and 2,500 tonnes as against an annual demand of over 20,000 tonnes.

The current crop, harvesting of which is to commence in late January/February, is estimated at around 1,000- 1,250 tonnes because of the continuous rains in recent months, Mr Ramakrishna Sarma, Managing Director, Travancore Rubber and Tea Company Limited, a major grower of cloves in the country told Business Line.

The continuous rains punctuated by occasional sunshine helped healthy vegetative growth, but at the cost of yield, depriving the plants of flowering which is turn has reduced the output by around 50 per cent from the previous seasons estimated 2,500 tonnes.

Non-remunerative prices for long in the past forced several growers to switch over to other crops. No motivating efforts have so far been made to bring them back. Even though the prices of other commodities have gone up significantly, cloves prices are oscillating between Rs 250-320 a kg because of import of poor quality material at low prices from other origins for a long time. “Therefore, the real value of Indian cloves has not gone up for over a decade,” he said.

As a result, growers have switched over to more remunerative other crops bringing down the area under cloves to around an estimated 2,200 ha.

What s gonna happen to Black Pepper market in 2011 ? What is the trend ?

The last two weeks we ve been receiving emails from many readers and customers with this question: Whats gonna happen to the market now, near month, the year ?...
After the big rise in 2010 when prices started at U$ 2,800 in January and ended in December at U$ 4,900 a lot of uncertainity clouds over the traders and importers all over the world.

Historically, every year prices start by droping in the beginning - January or February or March or even earlier some years like in 2007 and 2008 - in December, on the expectation of the two of main crops _ India and Vietnam. However India ceased to be an exporter already so the determinating crop became just Vietnam. Nevertheless India became a net importer and a big one - the sort of one that may determine the world export prices with its purchases abroad.

This was what the market expected to happen again this year, moreover because prices are said to have reached historical top heights staying over 4,000 level for more than 6 month.

However this is not happening this season - already in the month of March, new crop from Vietnam arriving slowly but no big change in prices. And the buyers - relutantly - are forced to buy, even small quantities, but they are buying.

We read some weeks ago an analisis saying that USA buyers were covered because of the 2010 imports: "United states of America has imported 52,014 Mts of black pepper compared to 49,148 Mts in 2009 and and 49,626 mt in 2008." see @ Record imports of Black pepper in 2010 Keeps USA Buyers away from Markets 2011/02/17

What this report forgot was that before the crisis of 2007 USA were buying 52.152 mt in 2005 and 55,598 in 2006 and growing at a rate of 3% per year average. Thus, nothing more natural than to start growing again when recovering from the crisis. We consider that these figures do not indicate that market is covered now.

This week the Public Ledger published a report upon consulting leading Pepper operators in Germany, Netherlands, Uk, and Olam people.

A part of minor divergences all of them consider that demand is steady and and buyers are short to some point, trying to delay their purchase to the maximum possible in hope to get better prices when Vietnam will come in full swing. However as one of the interviewed persons say " People have to buy in, they can’t wait longer: they have to book physically the pepper. So if the Vietnamese (prices) are dropping everyone will jump on that like crazy to buy it.” And commented about Vietnam "“If they are able to hold back the pepper they can play this market like they want, because the buyers have no coverage and there are very limited stocks in the pipeline. We are completely dependent on Vietnam.”

Indonesia who played a decision factor in the last two years sems to have no more enough stock to trade the buyers position, thus this year more than ever Vietnam will decide where the Black Pepper market will go.

Vietnam will produce between 100 kmt, - official information - and 120 kmt, according some skilled traders. Possibly even more if we learn for last years. However this makes no big difference as the world economy resumed and production is said to be below the consumption. Vietamese producers, processors and exporters made some good bucks last seasons so possibly they are pretty wealthy this year, with no rush, thus for make cash.

Other point not very much analized is that all prices for any commodity rose in general. The USA Dollar devaluation indicates that the Pepper priced today at U$d 5,000 equals to aproximatelly U$D 2,000 in the year 2000. And, just for the records the avreage price of pepper in 1999 was U$D 4,880. So historical hights is another lulaby. To become true, todaý price should be over U$D 10,000 pmt.

There is room to go, thus...

PEPPERTRADE EDITOR

Pepper Futures to fall on "Ground Reality" Sham Nair expresses his opinion

Kochi November 21 2010
With indian farmers releasing close to 5000 mt of black pepper stocks quite unexpectedly from the beginning of the month the tightness of the spot availability of the spice eased off and with 1085 mt stocks of so called mG-1 stocks made available to all the exporters from exchange platform ; the Black pepper futures currently running at a hefty premium will drop in the coming days and one is seeing ground reality of pepper trade currently according to the veterans of Pepper trade in India

We seldom see india as an origin seller when prices are low but they emerge as the principle source when prices peak commented a trader in Germany who didnt want to quote his name. There is no other origin like india who wil keep one crop below their beds and will show to the world when prices reach the usd 5000 mark he added.

Since farmgate pepper is continously availabe between Rs 10- 15 a kg depending on density of the material delivered to warehouses of exporters, major exporters are not running after exchange delivered pepper and in the recently matured November contract Nine exporters have together picked up only 50% of the total delivereis tendered by a major broking houses account of several clientse stocks were loosing validity on december 5th .

With continued availability of farmgate pepper and limited overseas demands currently and hardly any domestic demand, with new crop arrivals just 6 weeks away the expensive pepper futures are likely to fall on Ground reality although Funds will try to hold it for some more time trying to pass the hat to retail investors.

Weekend prices quoted in new York markets on friday 20th november were as follows

Brazil 560 g/l usd 4750 fob Belem Brazi BASTA usd 4850 fob Belem Indonesian ASTA usd 4950- 5050 fob panjnag Indian mg-1 asta usd 4900- 5100 fob cochin according to Newyourk based broking companies of spices.

Sham Nair

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India pepper needs long term strategy to stay ahead

November 05, 2010
Well, it seems like Black pepper from India will remain as hot favorite in the international market, as it is almost clear that supplies from Brazil and Indonesia will be inadequate in meeting the global demand, given big daddy Vietnam shows up only in January.

But latest reports also suggest that production from Vietnam will be lower by 10% at 90,000 tonne, compared to previous year. Further, if bad weather persists, Brazilian production will also be down by 40%.

So, who will benefit? Being the second largest producer after Vietnam, Indian pepper is definitely going to benefit from this global pepper production meltdown. Another supporting factor is the narrowing of the price gap between premium quality Indian pepper and other varieties. All these suggest the near term surge in market demand both locally and globally.

In fact, the rush is already evident with the price shooting up and springing over the primary target levels of 15150 earlier in March. If bad weather persist production will be dampened further and there is a good chance for the prices to breaching the 16,000 territory soon.

But the million dollar question is will India be able to handle this surge in international demand? Diseases, erratic climatic changes and obsolete agriculture methods had caused our output to slump to current projected level of 55,000 tonne from the once mighty 1,00,000 tonne. What might have caused this? Multi-crop planting policy in Kerala and Tamilnadu is indicated to be as the prime reason for this decline.

Currently, productivity of pepper in India is only 306 kg , while Vietnam has way ahead producing 1,200 kg – 1,300 kg per hectare. And forecast of International Pepper Community indicates that there will be a shortage of nearly 22, 216 tonnes in the 2010. the forecast also projects a significant rise in the global consumption to be in a range of 3,20,000 – 3,50,000 tonnes.

According to the Directorate of Arecanut and Spices Development, India is expected to produce around 53,000 tonne in 2009-10 , with Kerala contributing around 35,000 tonnes, up 40% from the same period a year ago.

Spices Board of India also points to similar figures with production figures at 55,000 tonnes and consumption figures at 44,000 tonnes, annually. Exports are expected to reach 25,000 tonnes, with imports around 14,000 tonnes. Production might have increased on a sequential basis, but the fact nevertheless is that farmers are increasing turning their face away from the once trust worthy Black Gold.

Falling prices is indicated to be as one amongst the many reasons. Price declines have also caused farmers to migrate to other crops which resulted in the decrease of farming area. Data suggests that there is a 0.3% decline in farming between 2005 and 2006 in Wayanad alone. Increasing cost of production is yet another area of concern to farmers.

For India to surge back to its golden age, answers should be found to all these vexing questions. May be it is now also the right time to voice all these concerns as experts from field will be here at Kochi to discuss all these matters.

Jointly organized by International Pepper Community and Spices Board, the meeting will discuss issues related to farming, production and export. Brazil, India, Indonesia, Malaysia, Sri Lanka and Vietnam are the members of IPC with Papua New Guinea as the associate member. The meeting will be held at Kochi, starting November 8.

What intended to say is that the current edge provided by bad weather won’t last long and in no way can be depended upon as a positive indication on a long term basis. What we need to have is long term planning and its effective implementation.

So, the verdict is that Indian pepper for the time being will definitely get an upper hand in International market amid tight supply and lower production. But to sustain this upsurge we need to device long term plans that would help increase yield per hector as well as total production.

Fueled by strong buying interest both domestic and international, Pepper futures are currently trading high with spot price at Kochi rising to 20,200 per quintal for un-garbled pepper and 20,800 per quintal for MG-1.
Source: CommodityOnLine By Praveen


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