Vietnam looks at India for price cues

Pepper futures in India is turning out to be a price discovery mechanism for traders in Vietnam, industry experts said today. Most traders in Vietnam these days monitor the web sites of Indian commodity exchanges for cues on prices, a senior official of a major pepper processing and exporting firm here said.

India is the only country having exchange-based futures trade in pepper. Traders as well as growers in Vietnam, the world's leading pepper producing country, are increasingly turning to these exchanges for cues on prices, he said.

"Indian pepper seems to be becoming a benchmark for sellers in Vietnam to fix their price," he said.

April contract of Malabar Grade pepper, popularly known as MG1, has gained 30 per cent at Rs 15,987 per 100 kg on the National Commodity and Derivatives Exchange, compared with a month ago.

Other contracts also gained similarly, while spot prices of pepper rose by 22 per cent to Rs 14,500 per 100 kg.

Fair average quality pepper in Vietnam also followed a similar trend, with 550GL quoting at $3,200-3,300 per tonne, a dealer here said.

Traders in Vietnam are tracking Indian prices closely, as India is the only country other than Vietnam with adequate pepper stock at present, he said.

Fresh crop from other major producers like Indonesia will hit the market only in June, while that from Brazil is expected in Sep-Oct, he said.

Pepper traders in other countries turning to India for price discovery is not a new development, said Kishore Shamji, a leading exporter.

"Traders in Kochi played a key role in shaping global pepper prices till 2000 and then the focus shifted to Vietnam, with that country emerging as a leading producer and exporter," he said.

Global supply squeeze from the third quarter of 2006, however, changed the situation, another dealer said.

Vietnam selling more than 50% of its pepper output by June led to the supply squeeze, which helped the rise in prices.

Average price of pepper topped $2,000 (85,719 rupees) per tn by August, compared with $1,200(51,431 rupees) before June.

Vietnam failed to take full advantage of the price rise, as it had sold most of its stock at $1,200 per tonne.

Indian pepper futures started rising because of the supply squeeze and domestic traders reaped the benefits.

Pepper contracts on NCDEX rose from the level of Rs 7,200 per 100 kg in July to over Rs 10,000 in August and to Rs 14,000 in September.

Pepper spot prices also rose to Rs 13,200 per 100 kg from Rs 7,300.

According to Vietnam Pepper Association, lack of access to information prevented traders from taking full advantage of firm prices in 2006.

Since the beginning of 2007, the association has repeatedly asked growers and traders to hold on to their stock and to adopt a deferred sales strategy.

Futures exchanges in India came handy in this regard, as any one visiting the web sites of these bourses gets an idea of daily prices, a dealer said.

Earlier, only major exporters based in Vietnam used to monitor the movement of Indian pepper futures, but now every one seems to be doing it, he said.