Pepper crashes as buyers refuse to raise inventory

All black pepper-producing countries are under pressure as most importers, especially from the EU and the US are not keen on raising their inventory even in the midst of harvesting season in Vietnam and India. It is surprising that the US and European buyers are staying away from the market, and only buying the minimum quantity required during the harvesting season.

In the global pepper trade this is the right time to stock pepper since around 50 per cent of the total world’s supply is during these months. The present global economic turmoil caused a serious setback in the demand of spices in the retail segment in the Western world. The poor offtake has built up pressure on major producers and hence prices have crashed.

Vietnam has slashed prices to $1,850 per tonne for 500 GL, $1,950 for 550 GL and 2150 for ASTA (all FOB-HCMC). It is surprising that Indonesia, which generally has seen the highest price tags in recent times, has offered ASTA at $2,150 (FOB-Panjang) on a par with Brazil and Vietnam.

Presently, India is on top of the price board at $2,300-2,350 (FOB-Kochi) and completely cut off from the global market. According to leading exporters the market is poised for a bear phase as harvesting season is on in Vietnam. If offtake continues to be so low and more pepper comes to the market, there is every likelihood of a crash on the price front.

The prices are depreciating on a daily basis and India is on a slightly better position as there is sufficient domestic demand. Latest estimates from Vietnam indicates that total production would be in a range of 105,000-110,000 tonne. Coupled with a backlog of around 15,000 tonne total supply will be around 125,000 tonne in Vietnam.

Although production in India is lower by 30 per cent, this time it will not affect the world supply of black pepper seriously. So the passive approach from EU and the US will build up pressure on the supply side, leading to a more serious fall in pepper mart.

Meanwhile, the harvest season is at its fag end in Kerala as plucking is over in the southern districts and major parts of the high ranges. Supply of pepper from Wyanad has also picked up and harvesting has started in Karnataka where 25,000 tonne production is expected.

Tamil Nadu has included pepper in 0 per cent VAT list which will eventually lead to smuggling and cross-border trading of the spice. Experts said the volume of pepper trade in Tamil Nadu would increase through this as trading can officially be performed without paying tax once pepper enters Tamil Nadu.