Indian industry welcomes Singapore Exchange’s pepper futures trade move

Reuters: The Singapore Mercantile Exchange’s (SMX) plan to launch the world’s first international futures contract in black pepper, if sufficiently liquid, can become the benchmark market for the agri commodity, analysts and officials in India said. 

The black pepper futures contract, likely to be launched in the third quarter, will be the first agricultural derivative and the tenth product to be traded on the SMX. 

“It is good for Indian pepper as now we can have the reference market like oilseeds and rubber,” said Chowda Reddy, senior analyst at JRG Wealth Management, a Kochi-based brokerage firm. 

“It won’t take away our volumes but it will help in price comparison and tracking world fundamentals.” 

The industry officials in India, the third largest pepper producer in the world after Vietnam and Indonesia, see it as a good initiative that will boost participation of local traders in the international market. 

“The only challenge before the SMX is to fetch liquidity. If they can bring liquidity, then it could become the benchmark market,” said Faiyaz Hudani, Senior Analyst at Kotak Commodities Services Ltd, a Mumbai-based brokerage firm.  The southern states of Kerala and Karnataka are the leading producers of pepper in India, where the crop is harvested from December to February. 

“Standardisation will not be an issue as the Asta quality pepper is accepted worldwide,” said Hudani. 

Asta grade is the premium quality pepper traded in the international market. Vietnam and India are the biggest producers of Asta grade pepper. 

In the 2010-11 crop year that began last December, India’s pepper production is seen falling to about 49,000 tonnes from 53,000 tonnes a year ago, a poll of six top exporters and traders had showed on 18 February.