Pepper spices up on US, EU demand

Kochi: Pepper exports are on the rise with the US and European buyers turning to India. India sold almost 1,500 tonne of pepper in the last three weeks as buyers scrambled to cover for near-term needs.

Currently, India and Vietnam are the only suppliers left with sufficient volume of pepper to trade. Strengthening of the Vietnamese currency and the marginal difference in rate with India make Indian pepper more attractive due to its superior quality, traders said.

During April-January 2010-11, a total quantity of 15,700 tonne of pepper valued R307.47 crore have been exported as against 16,295 tonne valued R269.36 crore of last year. The unit value of pepper has increased from R159.15 per kg in 2009-10 to R195.84 per kg during 2010-11.

Reports indicate that exports have surged during March and might help in bettering the performance of the last financial year.

In the domestic market, pepper prices surged ahead during the last few days as attention turned to India. On Friday, the spot price for a quintal of pepper stood at R23,000 gaining nearly 3.5% on a single day.

“Reports that Indonesia defaulted on pepper has made buyers look at India. The difference between Indian and Vietnam pepper is very low making the better quality Indian pepper attractive,” Faiyaz Hudani at Kotak Commodity Services said.

“There are reports of rain in some parts of Vietnam which could further delay arrivals at the terminal market,” he said and added “Strengthening of the Vietnam currency also adds to the cost of the buyer”. He is bullish on the commodity in the short and long run on shorter supply.

Nalini Rao of Angel Commodities feels that farmers are not willing to sell at lower prices. ”Arrivals at the terminal markets are lower by 40-50% on a daily basis as farmers hold on to pepper. Increased cost of farming especially increase in wage makes it unviable to sell lower,” she added. According to projections made by the Jakarta-based International Pepper Community, India's pepper production is projected to decline marginally by 2,000 tonne to 48,000 tonne during 2011.

“Farmers in Vietnam are also holding on to their stocks. They are cash rich with gains from coffee and cashew. They can hold on as the government also supports them,” P Nandakumar, a trade consultant based in Kochi told FE.

Staggered selling of pepper could lead to farmers and traders reacting more to external cues rather than the fundamentals of demand and supply. Arrival pressure, seen normally during the time when Vietnam and Indian pepper comes to the market, has been absent so far. Unlike in the past, contracts are of smaller size and for a shorter period.

Buyers do not want to lose on their inventory if prices fall due to some other reason, Nandakumar said. “Any small contract in such a market spikes the price to higher levels irrespective of the demand and supply conditions,” he added.

(Source: http://www.financialexpress.com/news/pepper-spices-up-on-us-eu-demand/768136/0)