Pepper prices turned bearish on fresh selling on previous week’s gains. Futures started the week on slightly positive note extended the recovery on follow through buying.
However, later on prices resumed down trend on profit booking on higher levels. Despite of overall bullish fundamentals of poor arrivals futures remained down side biased.
At export front India and Brazil were the only suppliers as Vietnam market remained closed due to Lunar holiday.
However, prices took smart recovery on good domestic demand on Friday but failed to sustain the gains and turned down.
Therefore, on heavy speculative activities against the fundamentals kept prices under pressure and futures ended the week on lower note.
Outlook
Pepper prices are expected to witness huge volatility on heavy speculative activities in coming week. Despite of peak arrivals season, arrivals are declining across the spot market; which might create a recovery in prices initially.
However, from January 31st onwards Vietnam is expected to resume its export activity which might create pressure on Indian exports.
Continuous strengthening of the rupee against the dollar has pushed up the Indian parity in the international market might also keep overseas buyers away from market. However, stable domestic demand amid tight supply might cushion prices from sharp losses.
Factors to watch out
Average daily prices at spot market of Kochi gained substantially during the week to `31,100 and `32,600 per quintal for Ungarbled and MG-1 grade respectively
Export activity from Vietnam is likely to remain closed due to Lunar holidays and will resume activity January 30th onwards
Stock positions at the NCDEX accredited warehouses were at 4200 tonnes as on January 25, 2011
As per data released by Spices board, during Apr-Nov, 2011 Pepper export from India were reported up by 43% to 17,000 tonnes against the same period last year
According to IPC, global pepper production is likely to increase by 7% while consumption & exports are expected to increase by 3% & 2% respectively
As per Spices Board data, international price of pepper in New York market declined to $7.06 per kg during the week ended January 20 , 2011 against $5.47 per kg quoted in the same period last year
Derivative Analysis
The NCDEX Pepper February contract prices, volumes have declined while open interest has increased. It is a good indication that a sharp rally against downtrend will develop creating a sell point for downtrend.
Courtesy: Karvy Commtrade Ltd.
