Pepper crisis continues on low import demand from US, EU

A serious slowdown in pepper purchases made by EU and US importers has aggravated a crisis-like situation in the global market. This has resulted in a sharp fall in prices.

However, demand from northern India has stopped the free fall in prices as overseas demand is almost nil. All pepper-producing nations are currently quoting prices below $3,000 a tonne, but are unable to attract much of the overseas demand. According to exporters, US and EU importers are not keen on enhancing the inventory level due to poor consumer offtake.

India has slashed the price of MG1 to $2,350 a tonne but could not find market in the EU and the US.

The global situation has forced Brazil to reduce the tag to $2,200 and Indonesia to $2,450. Vietnam is currently holding the highest price of $2,675 -2,700 for V-Asta. It is learned that Vietnam will be forced to keep its tag in tandem with other countries since their local currency might be devalued.

Meanwhile, the stock position in India has weakened further and the total stock with comexes will be around 2,000 tonnes by the next week.

But even at present, the supply of fresh crop is very weak. The Kochi market has also got only 20-30 quintals this week. Growers told Business Standard that harvesting in the southern parts of Kerala is rather weak this year and output is expected to be lower by 30-40 per cent. Normally pepper from southern districts of Kerala arrives in the markets by November itself.

The spot price here is quoted in the range of Rs 10,900-11,400 a quintal, which is expected to fall to a level of Rs 9000 within a short while. Although the harvesting trend is not at all optimistic, the weak global market demand ensures a bear phase in pepper mart.

The global economic turmoil has its serious impact on the spices exports especially black pepper. The leading consumer nations withdraw from the market as major producing nations like India and Vietnam are expected to commence their fresh season in January and February respectively. So these countries are having a ‘wait and watch’ approach in buying for the next few weeks.

Global production is not expected to come down drastically since Vietnam has estimated their crop size at 110,000 tonnes. Except India, all other regions will have almost the same level of production in 2009 also.