Contract trading in black pepper trade has once again become active as National Multi-Commodity Exchange (NMCE) has been granted permission to re-start contracts.
A couple of weeks ago, Forward Markets Commission (FMC) had granted permission to India Pepper and Spice Trade Association (IPSTA), Kochi-based regional exchange, to re-start the contracts. All stakeholders of pepper business, including exporters, traders and growers have welcomed the move since it would give a momentum to the business.
The FMC had directed to stop futures trading in pepper with May 2013 contract. This was due to a series of complaints over the quality of stocks maintained in various warehouses. Because of the mineral oil content in the stocks, trade was in serious trouble and delivery was nominal. FMC was forced to stop the trading then. India's overseas business was also affected due to reports on poor quality.
Meanwhile, IPSTA had approached FMC for re-starting contracts with an assurance to maintain the quality of pepper and got permission. IPSTA had started six contracts beginning from this month. In today's trading, June contract moved on a steady note at Rs 35,800 per quintal. Quotes at NMCE moved on a narrow range at Rs 35,900 (July) and Rs 36,500 (August). Volume of trading is rather low presently. In the global market tariff of India, Indonesia and Vietnam are almost on a par at $6,350 per tonne for ASTA grade.
Sources told Business Standard that MCX would also get permission as soon as the exchange had approached FMC for permission. It is known NCDEX will follow suit. To overcome the quality issue, NMCE shall form an independent team of experts consisting of Spices Board officials, officer from regional office of CWC and NMCE representative for periodical check of the quality of pepper in the warehouses. This team shall submit reports on a regular basis and guide the warehouse managers and staff to maintain quality.
Experts said, maintenance of quality is a serious issue in the case of black pepper. If exchanges can ensure the quality and keep it mineral oil-free that would be beneficial to the industry in general and good for the credibility of the Indian pepper in the overseas markets.
Giby Mathew, managing director, Celebrus, a commodity broking firm said, industry was lacking a hedging platform as pepper contracts came to a standstill. This is a welcome move which will help domestic traders as well as exporters. This will benefit India in overseas trading as exchanges assure the quality of pepper.
C P Krishnan, Director, Geojit Comtrade, said this is a welcome step as growers and traders will get a much-needed hedging platform.
A Kochi-based leading exporter told Business Standard, Let's hope for the best. The quality issue was fabricated by a section of big business houses since they piled up huge stocks a few months ago at prices much higher than global trend. The re-start of contract is a welcome step, but the market is not on a realistic plane compared with the global trends. This had affected India's export trade very badly, he added.
NMCE launched the modified pepper contracts from Monday onwards. In a press statement, the exchange informed that in the new contracts, pepper would be free of mineral oil. Six contracts, from July to December were launched, the press statement added.
Central Warehousing Corporation (CWC) would accept delivery at the following designated centres. With base centre at Kochi, Kottayam, Kozhikode, Vandanmedu (Idukki District) and Thrissur are the other delivery points. At Vandanmedu, Spices Board's facilities can be used for grading pepper from ungarbled to MG1.
