Pepper prices continued the bearish trend on cues from prevailing fundamentals during the week. Futures started the week on negative note extended corrections.
Vietnam resumed trade activity on Monday after a week long holiday which pressurized Indian pepper prices.
Lower prices quoted by Vietnam in global pepper market impacted Indian exports negatively. Higher moisture content in fresh crop arriving at spot market also fetched lower prices.
However, later on prices recovered from previous huge losses on short covering. Reports of decline in arrivals at terminal market of Cochin supported the prices.
However, prices failed to recover all the losses made during the week and ended the week on slightly lower note.
Outlook
Pepper prices are expected to trade slightly positive on fresh buying at lower levels in coming week.
According to trade sources, arrival season is expected to reach its peak by Mid Feb but arrivals are still remaining; which might create a recovery in prices initially.
However, rising arrivals in Vietnam along with lower rates quoted in global pepper market is shifting export demand from India to Vietnam.
Continuous strengthening of the rupee against the dollar has pushed up the Indian parity in the international market might also weigh on prices. However, stable domestic demand amid tight supply might cushion prices.
Factors to watch out
Average daily prices at spot market of Kochi declined substantially during the week to `30,600 and `31,500 per quintal for Ungarbled and MG-1 grade respectively
According to International Pepper Community (IPC), Indian production is estimated around 43000 tones down by 10% Y/Y
Indian pepper prices in global market are quoted at $6400 & $6700 per MT for MG-1 grade for Europe & US FOB as compared to $5800-5850 per MT for 550 g/l quoted by Vietnam. Therefore, export demand for Indian pepper is remaining very sluggish
Stock positions at the NCDEX accredited warehouses were at 3888 tonnes as on February 02, 2011
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 remained steady to $7.06 per kg during the week ended January 27 , 2011 against $5.47 per kg quoted in the same period last year
Derivative Analysis
The NCDEX Pepper February contract prices, volumes and open interest have declined. It is a good indication that investors had liquidating all their long positions. Further change in volumes traded might decide the trend.
Courtesy: Karvy Commtrade Ltd.
