Pepper Output Seen Falling 40 Per Cent

Kochi, March 28 | Updated: Mar 29 2004, 05:30am hrs
Over the last 10 days, futures trade in pepper has seen a flurry of activity with volumes crossing the 9,000-tonne level, prices peaking up to over Rs 90 a kg and daily turnovers in some of the contracts going beyond Rs three crore. The drought in Kerala has been attributed as one reason for the spurt in prices. With the pepper vines in most parts of Kerala withering away as the summer has peaked, there have been widespread rumours there would be at least a 40 per cent fall in production from the present level of 65,000 tonne. In the wake of such a fear, farmers and also traders are said to be holding back their stock in anticipation of a higher price and the arrivals to the market are poor.

The National Multi-Commodity Exchange (NMCE) saw pepper volumes cross the 5,000-tonne mark for the first time on March 16 and then cross the 9,000-tonne level on March 23. Officials at Geojit Infofin and JRG Wealth Management, members of the exchange, say that with the entry of the exchange and opening of trading centres in remote corners of the state, there has been a flurry of activity. Both the firms have over 1,000 clients each participating in the futures market. It is only natural that with wider participation, volumes will go up, they say, adding that speculation could not be ruled out totally.

A section of the traders sees in this a trend to gamble and with the prices expected to zoom in the wake of the drought situation and Vietnam not expected to have a higher crop. Traders say that the payout for certain broking firms go into lakhs which would mean that some other firm or trader has had to bear the brunt. However, officials of Geojit and JRG say the trade is founded on the principles of the capital market and there are similar security measures.

India Pepper and Spice Trade Association (IPSTA) president Kishor Shamji, while admitting that volumes on the exchange had come down drastically, felt that futures trade had caught up elsewhere in the country and with the fears of drought prices had peaked. In the international market, Indian price was around $1,950 while that of Vietnam was around $1,350. This would push Indian pepper out from the international market, he felt.

Former IPSTA president T Vidyasagar said that with the instrument in place, what was expected to happen in another three months happened now. Speculation was rampant and poor arrivals, drought and astrological predictions that black grains would ensure wealth led to such a volatility in the market.

Despite fears of cheaper varieties from outside entering the market, there are ways to check the flow of imported pepper. All import consignments would have to go through the Customs and samples sent to the Spices Board. Also, the board would have to be informed of the export consignments which could help check fraud, says a section of traders.

The launch of the cardamom futures hardly a month ago has seen prices zoom and hit the upper circuit twice in the last 10 days. Like pepper, here too fears of a crop damage due to the drought has seen prices shoot up to be in the Rs 450-550 range per kg. For the whole of last week up to Saturday, the total volumes in the three contracts were over 1,136 kgs and turnover for the July contract crossing the Rs 4-crore mark on March 22.

Trading sources say that with the spread of the concept of futures trade, growers in the hilly districts of Idukki and Wayanad who got lesser prices earlier had now the advantage of a price mechanism and were receiving the benefits. Awareness campaigns and the availability of terminals to trade had helped them come out of the clutches of big trade mafias, it is believed.