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Pepper dips in India despite supply crunch

Pepper dips in India despite supply crunch
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First Published: Fri, Aug 31 2007. 01 18 AM IST
Updated: Fri, Aug 31 2007. 01 18 AM IST
A global pepper supply crunch in major producing countries, which have reported a fall in crop yield, has not made the spice pricier in India.
Indian pepper prices have instead dropped by around $800 (Rs32,960) a tonne during the month of August—from as high as $4,000 a quintal (100kg) at the start of August to $3,200 by the end of the month.
While analysts claim that the fall in crop prices is due to the expected arrival of shipments from Brazil and Indonesia in a fortnight, those in the pepper trade say that even when the harvest of pepper began in the two major producing countries—India and Vietnam—this year, pepper prices shot up since a fall in production was expected.
Anand Kishore of Kochi-based Kishore Spices Co. said when it had been globally estimated that there would be a pepper production shortfall, including in Brazil and Indonesia where the harvesting has just begun, prices were expected to improve. This was indicated well in the spot market in Kochi where pepper was quoted at Rs125 per kg when the futures prices was nearly Rs117. Even in the primary market, the farmgate price was around Rs125 a kg.
“The continuous fall in futures prices here, defying the basic fundamentals, has already had an international impact forcing other countries, including Indonesia and Brazil, which are to enter the global market with their stock next month, bring down their prices,” Kishore added.
Kishore said India had an edge in the global market that was lost owing to the limit on position held during the end period of a contract.
Though the regulator, Forward Markets Commission (FMC), revised the limit after nearly two months and raised it to 170 tonnes from 100 tonnes for an exporter and suggested that it may be revised upwards later, India stood to lose around 3,000 tonnes of export on account of the ceiling.
The International Pepper Community (IPC), the Jakarta-based inter-governmental organization of pepper-producing countries, had estimated global pepper production to be 211,000 tonnes in 2007 compared with 266,000 tonnes last year.
IPC said reports from Vietnam showed that production would be around 80,000-90,000 tonnes this year—down between 10 and 20% over last year, mainly owing to unfavourable weather conditions and pests.
The world’s largest producer and exporter of pepper, Vietnam, is reported to have shipped out 51,000 tonnes of the spice worth $153 million up to July this year—down 42.3% in volume but up 17.6% in value over the same period last year.
Vietnam and Indonesia, whose combined output accounts for 45% of the world’s pepper supply, are planning to form a joint committee to focus on marketing, improving quality standards and compiling statistics.
Faiyaz Hudani, a research analyst at Kotak Commodity Services Ltd, said according to Indonesian Pepper Exporters Association, world pepper production for the year is expected to be 330,000 tonnes, while demand is expected to be 377,000 tonnes, leading to a deficit of more than 47,500 tonnes. Hudani said pepper prices have fallen in the near term on account of increased inventory on a global level.
Shipments from Brazil and Indonesia are increasing selling pressure on the global front, but at the same time very minuscule buying demand is seen in the domestic and international market.
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First Published: Fri, Aug 31 2007. 01 18 AM IST
More Topics: pepper | Money Matters | Commodities |