Pepper hit by sluggish demand, policy issues

Sluggish upcountry demand and buying support in the export market coupled with the suspension of procurement operations by the Kerala State Marketing Federation have once again caused a crash in the black pepper market here.

Earlier, the new foreign trade policy was also a setback to the local market and the price of good quality garbled pepper crashed to Rs 6,900/ quintal.

The traders expected two important announcements - quantitative restrictions in the import from Sri Lanka and also some kind of export incentive.

But the policy affected the market very badly, which in turn resulted in the suspension of procurement. The federation had already procured pepper to the tune of 5,000 tonne and export incentive is a must for clearing the stock in the present global market conditions.

The local market is suffering due to the increased duty free import from Sri Lanka at the rate of $ 1,375/ tonne, while the Indian price is still higher by $ 225.

It is also notable that the global market is struggling even at very low prices due to lack of demand from Europe and the US.

During this week Vietnam has slashed prices to $ 1,170 [500gm/litre], $1,230 [550gm/litre] and $ 1,350 [ASTA], but no effective demand there. Price in Brazil is $ 1,400 for ASTA and $ 1,375 for B1.

Interestingly, Vietnam had exported black pepper to the tune of 20,000 tonnes during January - March and the total production in 2005 is to the tune of around 85,000 tonnes.

This export trend indicates that importing nations are not in a hurry and are prepared to wait for the prices to come down further.

This also indicates that Vietnam will have sufficient stock at the export front throughout the year, which doesn't sound too good for Indian black pepper.