Weekly Spices Wrap Up: Pepper Continues To Win The Game On Strong Fundamentals

Pepper continued the uptrend on strong demand amid tight supplies in the domestic and global markets. Reports of Vietnam not selling aggressively supported the uptrend in the prices. Indian pepper MG-1 quoted at $6,500-6,800 and Vietnam 500 GL surged to $ 5,900 per tonne. The spot pepper prices touched new high in India. Malaysian white pepper prices had enjoyed a good run and surged by about 27% over the last year. Prices surged further boosted by the tight supply globally as farmers hold back their stocks in anticipation of higher prices. Black Pepper for the May contract on NCDEX ended the week higher by 4.40% at Rs. 29069 after hitting the fresh high of Rs. 29342 per 100 kg.

Chilli prices again came under selling pressure as the crop damage size is expected to be lesser than the earlier forecast. Good Chinese crop this year is grabbing all export orders from US and EU which is impacting Indian prices as of now. As per news sources, export demand from Bangladesh, Malaysia is the only supporting factor for prices at lower levels. Chilli 334 variety price dipped by Rs. 100 from the last close to Rs.9100 per quintal in the Guntur spot market. Chilli for the June delivery ended the week down 12% at Rs. 9580 per 100 kg.

Market sources said pick-up in demand at the spot markets mainly pushed up jeera futures prices but supply pressure capped the gains. As per market sources, the total production of jeera in the current season is likely to be around 21 lakh bags (1 bag = 60 kgs ) against 28 lakh bags reported last year. This was mainly due to sharp decline in sowing acreage of jeera crop in Gujarat. Jeera for the May contract ended the week higher by 2.45% at Rs. 15,155 per 100 kg and the open interest dipped by 6.32% to 17,466 tonnes.

Demand from other part of country has also slowed down which is also pulling down the turmeric prices. As per the latest release from the Spices Board of India, exports of turmeric was down around 9% to 42,500 tonnes with value of exports was up by 78% toRs. 608.85 crores, during April-February 2010-11. As per trade sources, turmeric production in 2011 is estimated around 65 lakh bags against 45-48 lakh bags last year (Each bag=70Kg.). The NCDEX May turmeric futures ended the week marginally higher by 0.33% at Rs. 8880 per 100 kg and the open interest added 5.75%.

Cardamom plunged further on weak demand amid higher arrivals. MCX cardamom May contract ended the week down by 7% at Rs. 988.60 a kg and the open interest dipped by 4.12% to 1,579 tonnes. According to trade estimates, India's cardamom production is slightly higher than 11,000 tons. As per the estimates of spices board, the production in Guatemala expected near 20,000 tons and approximately 90 percent of the harvesting from Guatemala is harvested between October to April period. As per the latest release from the Spices Board of India, a total quantity of 865 tonnes of cardamom (Small) valued Rs. 100.41 crores exported during the April-February 2010-1 as against 1765 tonnes valued Rs. 143.62 crores of last year.

Major Events During The Week

Malaysian White Pepper Prices Surge More Than 10% Over Last Year Close:

Pepper prices surged further boosted by the tight supply globally as farmers hold back their stocks in anticipation of higher prices. The average price of domestic white pepper surged to RM21,530 per tonne on Tuesday, an increase of RM2,030 per tonne, or more than 10%, compared with 2010s highest closing price of RM19,500 per tonne. The price broke the RM20,000 per tonne mark early last month. White pepper prices had enjoyed a good run and surged by about 27% last year.

The average price of black pepper hit this years new high of RM13,400 per tonne yesterday, which was up by RM1,300 per tonne or nearly 11% from the closing price of RM12,100 last year. In 2010, black pepper soared by nearly 30%, from RM9,350 per tonne recorded in 2009.

White and black pepper hit their historical highs of RM28,000 and RM16,000 per tonne respectively in 1999. From those peaks, they nosedived to RM6,500 and RM4,000 per tonne respectively five years later before making a strong recovery in 2006.

Malaysian Pepper Board director-general Grunsin Ayom said farmers in India and Brazil, the world's second and fourth largest producer respectively, had been holding back their stocks, hoping to sell at better prices later. He said some local farmers, who were economically better off, were also waiting to sell their stocks into the price rally. Pepper is increasingly used as an ingredient in food processing, and domestic consumption had gone up steadily over the years. Malaysia, the worlds fifth largest pepper producer, exported an estimated 14,040 tonnes worth RM190mil last year, up from 13,122 tonnes valued at RM156mil in 2009. There are more than 14,100 ha of pepper farms in Malaysia, of which 14,000 ha are in Sarawak. The other pepper-producing states are Johor and Sabah.

Outlook For Next Week:

Black Pepper is likely surge further on strong demand amid tight supply position. However, chance of profit taking cannot be ruled out. Black Pepper for May delivery is likely to face resistance at Rs. 29550 and then at Rs. 29700 while support at Rs. 28300 and at Rs.28050 levels.

Weak fundamentals are likely to pull down the cardamom prices further. MCX May cardamom is likely to find the support at Rs. 950 and resistance at Rs. 1,020 a kg.

(Source: http://www.indiainfoline.com/Markets/News/Weekly-Spices-Wrap-Up-Pepper-Continues-To-Win-The-Game-On-Strong-Fundamentals/3675021350)