It says when you are grappled and want to cast a spell you can only use material components that you have in hand.
What exactly does "in hand" mean?
You are literally holding the components (which effectively means never) or that you can can touch with ease - like a divine Focus.
Are components in a components pouch reachable or not?
Casting Spells while Grappled/Grappling: The only spells which can be cast while grappling or pinned are those without somatic components and whose material components (if any) you have in hand. Even so, you must make a concentration check (DC 10 + the grappler’s CMB + the level of the spell you’re casting) or lose the spell.
Well, if you need sand for a sleep spell and you're grappled on a beach, then you can grab some.
Consider, if you're grappled, you can grab a taser out of your purse -- on a par with a wand. But, with a spell you have to cast the spell and get the necessary item. So, if grappled you could use one round to (try to) get the material component in your pouch, then it would be in hand, then you would be able to try to cast the spell in the next round.
Ordinarily, you don't have to do this if the material component is in your pouch. So, in a sense, it's still possible, but you have to spend an action to get the item into your hand while grappled.
The grappled condition doesn't prevent you from retrieving items normally (a move action). Grappled prevents you from doing things you need two hands for, so a grappled barbarian might decide to drop his greatsword, draw a dagger, and proceed to shank his grappler.
It's sort of implied that you can no longer use the "retrieve spell components" free action, otherwise the line would be completely meaningless. But I think you could still fall back to the "draw item as move action" for spell components.
However, drawing a non-weapon object does provoke AoOs, and casting defensively can't prevent that.
So in essence a grappled caster has to draw components as Move instead of Free, and it provokes. And if he needs more than one component, he needs to spend a Move to draw each one...