Pepper exporters wriggle out of deals

Raw pepper exporters from India are opting out of committed deals by reaching an understanding with their overseas buyers following a rise in the price of the commodity, dealers said today.

A few exporters have opted for 'washout', a term used by exporters to describe a complicated process, by which an exporter can wriggle out from his obligation to deliver goods to a buyer, they said.

Unlike defaulting on an export contract, washout provides an opportunity to settle the issue on mutually agreed terms, an exporter said.

A mutually acceptable rate is worked out between a exporter and an importer so that the former can ease out from the contract.

Against a prevailing rate of $4.15 per 1 kg (Rs 164.21) for Indian pepper, washout deals are currently being settled at $3.76 (Rs 148.78). A couple of exporters in Kochi have opted for this mechanism this week, said an exporter.

Exporters are happy to cut such deals as they could use stocks with them for speculative purpose in domestic futures exchanges which provides much higher return, he said.

Normally such deals does not involve any down payment of cash, as most often contracts are rescheduled with fresh price tag.

In rare occasions of immediate settlement, exporters may source supply from a cheaper origin to avoid further complication. Raw pepper exporters are hard pressed after the spot price and the futures price of the commodity have been rising in the past two weeks.

Active December contract in the National Commodity and Derivatives Exchange of India rose to Rs 15,470 per 100 kg today, up 22 per cent compared with a month ago.

In the spot market, garbled grade has risen by 17 per cent to Rs 14,700 rupees per 100 kg from a month ago.

Indian pepper has been out-priced in the global market following the sharp rise in the commodity's price.

Indian ASTA grade pepper is at $4,000 per 1 tonne (Rs 158,299) compared with $3,500 (Rs 138,512) in Indonesia, exporters said.

Apprehensions of a fall in output in 2007-08 (April-March) following heavy rains in Kerala and Karnataka as well as speculative buying have boosted pepper price.

India exported 17,000 tonnes pepper worth Rs 245 crore in April-September compared with 12,450 of Rs 108 crore in the same period a year ago. India plans to export 30,000 tonnes pepper worth Rs 450 crore in 2007-08.