Why Indian pepper is trading cheap in international markets

Last Updated : 15 October 2011 at 13:55 IST
KOCHI (Commodity Online): In fact it is a rare occurrence; Indian Pepper varieties usually trade at a premium to pepper varieties from other nations. Suddenly this has changed.

Currently, Indian parity in the international market is quoted to be the cheapest at $8,050-8,100/tonne (c&f) for Europe & $8,300/tonne (c&f) for US is enabling the exporters to bag firm pepper export orders, says a report from SMC global.

So what could be the reason?

“In Vietnam, for instance, regulations are on which prevent importing and re-exporting of pepper. Now, the traders there are only allowed to export value-added pepper. This means they are unable to import pepper from India and simply re-export the same unless they process it and make it into a value-added product.” said Gulshan John, head of Harmony Spices based out of Kerala.

“Given the tightness in domestic supply situation, Vietnamese are unable to export pepper at low prices, which they used to do.” he added.

Domestic exporters there have to pay more for pepper because of the evident supply crunch in pepper in Vietnam.

As per recent media reports, Vietnam is not even quoting the price for Asta grade as the availability is down to trickles. (Vietnamese pepper, last week maintained $7,220/MT even as Indian prices were quoted at $6721/MT; Ex-Kochi)

“The stocks there in Vietnam have already been sold.” he said.

This has prevented Vietnam from selling Pepper cheap.

“Further, with pepper prices climbing in the Indian futures market, traders who insisted on delivery of pepper found it cheaper to source pepper from the spot.” Gulshan pointed out.

With spot demand picking up, traders opened up their inventories.

Speculation
In months, pepper in the futures market on NCDEX climbed by hundred rupees.

“This is mainly due to speculation...” he said.

But the prices do not climb beyond a point, as investors seek to remain risk averse.

“Nobody would dare to take a position at Rs.370 levels.” he said. “And as a result, stiff resistance was experienced at that price point..”

All together, the prices in spot appreciated by modest margins even as the futures maintained their levels on speculation.

This ultimately resulted in cheaper Indian pepper prices as exporters bought from spot.

Speaking of a development, Gulshan John commented that a shift in startegy on the part of exporters and importers is visible.

“These days, the time-frame for contracts have come down. Exporters are not committing to prices beyond, say three months due to uncertainty in the global markets.”he said.

As published in: http://www.commodityonline.com/news/Why-Indian-pepper-is-trading-cheap-in-international-markets-43020-3-1.html