Vietnam to slash prices of black pepper

Vietnam, the world's largest producer of black pepper, is set to significantly cut the prices of the spice during the current month due to the lack of demand. For the last 8-10 weeks, the country had been quoting the highest prices for black pepper.

The South East Asian nation has already lowered the prices by $300-350 a tonne, indicating a sea change in its selling strategy. The ASTA grade is currently priced at $3,975 a tonne, 550 GL at $3,650 and 500 GL at $3,450 (all fob HCMC).

According to recent estimates, Vietnam exported around 15,000 tonnes during January-March. The country has so far harvested about 80-85 per cent of the total crop and due to lower exports in January-March, the stock has swelled to 60,000-65,000 tonnes.

The paradigm shift in the pricing strategy is mainly due to this reason. Besides, a host of other reasons including the rise in local inflation rate to 12.5 per cent during January-February and a sharp increase in bank rates have been putting pressure on farmers and traders to encash their stocks.

Vietnam's strategy to raise prices during the last year was based on lack of selling pressure permitted by heavy financing of stocks at very convenient rates.

It is reported that most of the loans should be paid back or renewed by the end of this month. Most of the operators should sell a major chunk of their stocks to cover the debts.

It is learnt that the coffee exporters had lost $125 million on the export front during the last few months, thus creating a panic situation for pepper traders and exporters.

The economic recession in the US and the wait-and-watch policy adopted by buyers from European Union have slowed down the demand for black pepper remarkably, creating a sea change in the global pepper market.

EU and the US were very active in the Indian market during January-March and they now have enough stocks to wait for the prices to plummet further. Both Brazil and Indonesia are not active in the global market.

It is estimated that the world's requirement of pepper for the next three months will be around 40,000 tonnes and Vietnam will be the major player during the period.

India, which offers MG1 grade at $3,850, is not in a hurry to sell off the stocks as its domestic requirement is estimated to be around 35,000 tonnes.