India may become net importer of pepper

India is likely to become a net importer of black pepper this financial year as the pricing pattern in the domestic and global markets favours large-scale imports. Since January, the Indian and global prices, especially those in Vietnam, have a huge gap that tempt the value-adding industries to opt for the import route.

On an average, the Indian price is higher by $400-$500 a tonne throughout the current year. The price of ASTA grade pepper in Vietnam is $2,130 a tonne (FOB-HCMC), while the Indian offer is $2,750 (FOB-Kochi). According to reports from Vietnam, the exporters there had sold pepper for June-September period even at a rate of $2,075 a tonne. Both Europe and the US are very active in Vietnam market since the country is the lowest price destination currently.

Indonesia is also offering the spice at $2,125 a tonne for July-December period. The Indian market is strongly under the clutches of speculative trading which has nothing to do with the international market situation. It is only the strong speculative trading on the futures platform which is resulting in the price gap between India and other global origins of pepper.

Sources said that it is likely that 70-80 per cent of the total export from India would be imported pepper this time. This may be the first time that India would be a net importer of black pepper in the history of pepper planting in the country.

Traders told Business Standard that the domestic market favours to sell pepper as Indian farmers get Rs 30-40 higher than what their counterparts are getting in other producing countries.

It is preferred to opt for hedging the stock in order to take advantage of higher domestic prices.

Due to the summer heat the domestic demand is likely to drop within next 2-3 weeks. According to them there is every possibility for a depreciation in prices by the end of current month. Since India is on a much higher platform on the price front, the export component will be much lower and the pricing would be decided only on the basis of the domestic demand.