Pepper exporters may default on supply crunch

The black pepper market is facing a serious supply crunch for the last three to four weeks, though the spice is being actively traded in the futures exchanges. The spot prices are intimated on a day-to-day basis by the India Pepper and Spice Trade Association (IPSTA).

There is absolutely no stock with the small and medium farmers and stockists as the entire stock has already been sold out. According to farmers, only rich farmers who are not in a hurry to clear their stocks are keeping the spice and are planning to benefit the expected ‘price rise’ during the next crop season.

According to a top exporter, there would be defaults from Indian exporters in the near future as a situation may arise wherein the delivery of the commodity from the comexes will be almost impossible.

He also said that it is likely that short sellers might walk away simply by paying meagre penalties, without giving delivery. This will lead to a very serious situation which may badly affect the credibility of Indian exporters. The supply crunch will be more serious as the demand for the winter season is at its maximum.

Moreover, the stocks with the national commodity exchanges have dropped to 3,500 tonnes after the September delivery and since the availability of farm gate pepper is virtually nil, no more stock will be going to the warehouse of the exchanges till December, when the next harvesting season begins.

There is absolutely no spot trading at IPSTA and the regional exchange is only giving indicative prices for the last few months due to very thin arrivals to Kochi, the country’s major spot market for black pepper.

“We have never seen a situation like this wherein absolutely no spot sellers and stockists are willing to even talk about the prices. Near month future contracts were pushed down to very low levels than the indicative prices published by IPSTA”, said a top official of a leading pepper export house.