Vietnam pepper rate cut not to impact India trade

Vietnam reduced the tags on all grades of black pepper due to the lagging exports business. However, India is still in an advantageous position, since Vietnam currently quotes the highest price tags across the world. The world's largest producer of black pepper pegged the tags above the $4000 a tonne mark last week.

But contrary to last week's trend, Vietnam pegged the tags for ASTA lower by around $100 a tonne at $4150 and it closed around $4270 on Monday.

India is currently quoting 500 GL at $3770. It was $3840 a tonne on Monday. The 550 GL is being quoted at $4060. Buyers from the US and Europe are not interested in the Vietnam market due to the exorbitant prices.

West Asia and Pakistan have shown an interest in Vietnam, but major buyers were reluctant to place orders, according to leading exporters. Hence the exporters of Vietnam were forced to reduce the tags.

There are also reports of defaults from the Vietnam shippers due to the price rise and not because of insufficient quality pepper. The exports from Vietnam touched 9500 tonne in April, without including the border trade with China.

As the US and European markets have to provide for July-December period, they have to depend on either Vietnam or India. India will be a more attractive destination due to the price advantage. The only hurdle though would be the lower tariffs offered by Indonesia.

But the Indian exporters are not quoting prices for the period beginning from July due to the high volatility in futures trading. US importers are ready to place orders at $4050 for the July-September period, but the exporters are not in a position take orders because of the high volatility on the futures counters. A leading exporter told the Business Standard that it would be too risky to quote the tags for July-December, as the future counters have been uncertain for a long period.

The Indian exporters have already struck a deal with a host of countries including USA, Germany, Canada and Russia for shipment in May at $3950. So, according to exporters, the next couple of weeks would be crucial for the global pepper mart, especially that of India.

Meanwhile, speculation by Vietnamese and Cambodian traders dominates the Vietnam market amid the peaking harvesting season. The overseas demand is low and unless there were some overseas orders, the Vietnamese market will suffer a serious set-back. Pepper is being hoarded through speculative trading in anticipation of a further appreciation in prices. But this may be counter-productive in case of a weak export demand in the coming moths, say experts.

Brazil is not so active currently and Malaysian tags are also appreciating on account of demand from the Far East nations such as Japan. The Indian exporters were earlier concerned about the appreciating rupee, but are taking consolation from the gap between India and Vietnam on overseas pricing strategy. Most of the exporters expect a further price depreciation in Vietnam.