Vietnam expects pepper bounty

Latest estimates on an anticipated bounty in black pepper production in Vietnam, the world’s largest producer of the spice, has halted the bull phase in markets trading the commodity across the globe. According to latest estimates, the production of the crop in Vietnam is likely to go up to 135,000-140,000 tonnes this season. The earlier estimate was 100,000-110,000 tonnes.

The latest forecast is based on a sharp increase in fresh harvest from provinces that have newly planted the item in the Southeast Asian nation. According to reports from Vietnam, the harvest from areas in Gialai and Quangtri would come to more than 50,000 tonnes. This when the earlier estimates from the two provinces had pegged the figure at 28,000 tonnes only.

So the supply, especially that of ASTA-grade pepper (ASTA stands for American Spice Trade Association) from Vietnam, would be higher this time. So, the Vietnam traders (who transact almost a third of the world’s black pepper) now offer the spice at a much lower tag at $6,750 per tonne. Only a month ago, it was around $7,200 per tonne.

What’s more, the season in Vietnam will be followed by harvesting in neighbouring Indonesia (starting by June), where the total production is expected to be 20,000 tonnes.

On its part, Indonesia slashed the price for ASTA-grade pepper to $7,350 a tonne from $7,500. As for Brazil, it offers the crop at $7,100.

According to leading traders, the demand from Europe and the US did not pick up this time, as importers expect a much lower price tag in the coming weeks. The importers say the price may further come down to $6,000 a tonne in four months from now, once Indonesia begins marketing pepper.

The price advantage has led to good demand for export of pepper from Vietnam, which tops among countries that sells the commodity to other countries. In March, the Southeast Asian nation exported 17,000 tonnes of the crop.

India comes nowhere in the global pepper market, because of the highest price -- $8,000 a tonne -- across the world. The Indian market is virtually in tatters also due to a customary speculative trade in the futures market.

The Forward Markets Commission (FMC) is just a silent spectator, and has not taken serious action against a small section of operators involved in speculative trade during the last 2-3 months. In short, the Indian market does not move on a realistic basis; it basically creating a price bubble.

This has made the growers especially of down-country Kerala to think that the price would even cross Rs 500 a kg. Actually, the bubble has burst in the local pepper market, because of the FMC’ s laxity in curbing speculative business. Experts say the market has to move according to the global trend and on realistic grounds.