Can disparity in futures prices at two prime commodity exchanges in the country hold pepper trade to ransom?

If the situation in Kerala's pepper market is any indication, the price difference can definitely be a stumbling block in the commodity's trade.

In fact, wild fluctuations in the pepper futures market and certain, allegedly 'unfair', practices have forced farmers to call for the Forward Markets Commission's intervention.

The fluctuations at the national level exchanges over the past several weeks have restrained exporters from making any commitments and farmers from selling their produce.

The price difference between the two prime exchanges has become a cause of concern for farmers and small traders.

According to pepper trading sources in Kerala's Idukki district, a Kattappana-based trader has referred this issue to the FMC.

Though the quality specifications are same and the delivery schedule is only within a gap of 5 days, the wide difference in prices between the two exchanges has put the farmers in a dilemma as to which one to follow as benchmark for selling their produce.

The main reason attributed to the difference is substandard material being held in one of the exchanges, sources said.

Exporters refrained from taking delivery from such exchange due to their past experience. Even a Rs 9 difference may not be enough to cover the reprocessing charges, said a trader in Idukki district's Adimaly town.

Though several thousand tonnes of pepper are being traded every day, the warehouses of the exchanges have stocks between 5,000 and 7,000 tonnes. For the past several weeks, small traders and processors who have sold to investors for delivery into the exchanges have been put to difficulties since the exchanges are unable to provide sufficient warehousing facilities.

Only from March 5 arrangement has been made but that is not satisfactory and several trucks are waiting for unloading.

The seller has to bear the waiting charges as well as the additional transportation cost since the warehouses are being nominated in different districts, over 50 km from Ernakulam district limit. Adding to these woes, is the absence of weighbridge facilities which also result in wastage of time.

Pepper futures crashed by Rs 700 -750 a quintal on March 5 without change in fundamentals.

However, the reason attributed was the crash in the stock market. Such wide fluctuations hamper the interest of small operators who are being wiped out from the trade or have to square off their business since they cannot withstand such fluctuation.

It is also reported that some of the members of the exchanges through their franchises are permitting trade on cash basis.