Buoyant domestic pepper mart baffles experts

It is interesting to note that there is absolutely no correlation between the domestic and global pepper markets. They seem like water-tight compartments.

Major global producer, Vietnam slashed its tags on Monday morning. The Vietnam market today opened on a weak note as Vasta was quoted at $ 900 a tonne, down $100 from last week's closing. Likewise, 500 GL was quoted at $2500 and 550 GL has quoted at $2660. The buoyancy in the Indian futures has however continued, leaving market experts baffled.

Experts opined that since there is no substantial off-take from Europe and USA, a strong bull phase is difficult. So they advice caution, especially to small investors.

The futures market has been highly volatile. By noon, all the contracts lost Rs 100 per quintal on an average. Experts opine that the pepper market is highly sensitive and it is very difficult to determine the course since a handful of operators control the show.

One cannot rule out the impact of high stocks on the domestic market. According to leading Kochi based traders, commodity exchanges have a stock of 15,000 tonne while the market stock is around 25,000 tonne. This total stock of 40,000 tonne is a crucial factor for the pepper market. Instead of following the demand supply laws, the spot market is currently following the futures quotes. As Malabar pepper is currently placed higher (up by around $400 per tonne), India is undoubtedly out of the global export businesses. Even Vietnam cannot attract buyers from Europe and USA as the spot price in USA is lower. Hence importers are not in hurry to step into the market. India is not at all in an advantageous position on the export front.

Interestingly, value-added producers are very keen on importing Vietnam origin pepper because of the much lower tags.

As the demand for white pepper is on the increase, Vietnam is serious on producing more. According to reports, at least 25,000 tonne of the total production of 100,000 tonne would be in the form of white pepper. It is also estimated that there would be a slow-down in white pepper production in Indonesia as there is low black pepper output there in the current year. This may apparently lead to a lower stock position of black pepper in Vietnam, said a leading exporter.

But as per latest reports, there will be enough stock in Vietnam during the next few months. Hence, it may further slash its tags. Since the Indian market does not operate by actual market parameters, but rather moves on speculative practices, farmers and retail investors should be more careful about the market.