Pepper may firm up on supply concerns

Pepper may firm up in the next two-three weeks as exports from India reached a six-year high of around 22,000 tonnes in January-August 2007, dealers said today.

Although Spices Board, the official agency monitoring exports figures, is still working on it, according to estimates by exporters in Kochi, shipments from the country has reached 22,000 tonnes in the first eight months of 2007.

Dealers are also buoyant that exporters have orders of 5,000 tonnes for September-October delivery while commitments for another 2,000 tonnes are in the pipeline for November-December.

"If supply in spot markets continue to stay at present levels, commodity exchanges warehouse stocks will be exhausted soon," said Jojan Malayil of Bafana Enterprises, a leading exporter.

Supply at the farm-gate level has dwindled in the last eight weeks as growers are either holding on to the commodity or have run out of stocks, a dealer said.

Growers with immediate cash requirements are not having much of stocks while those having holding capacity are not willing to sell at present prices, he said.

"Looking at the demand-supply situation, I am not feeling bearish anymore on pepper," he added.

At present, warehouses of the three national commodity exchanges together have stocks of 11,000-12,000 tonnes and exporters are banking mostly on these stocks to meet their requirements. A firm trend in Vietnam is another factor that will help pepper here, dealers said.

Sellers in Vietnam are not eager to offer stocks as they have already shipped nearly 60 per cent of their estimated output of 80,000-90,000 tonnes.

"There are no signs of any aggressive selling from Vietnam", a dealer here said.

Sellers in Vietnam have declined offers of $3,000 a 1 tonne (Rs 122,911) today for 500GL grade from buyers in Europe and West Asia, he added.

At present, Indonesia and Brazil appear to be the only points of worry for domestic pepper growers as harvests are on in these countries, dealers said.

The only concern regarding the Brazil and Indonesia harvests is the output, of which there have been no indications of a rise from the earlier estimates in these countries, a dealer said.

However, a section of dealers said harvests in Brazil and Indonesia need not create pressure here as it is a well known fact that pepper harvests takes place in these countries at this point of time.

Selling pressure has eased in Brazil and Indonesia as markets in these countries have been quiet in the past few days compared with a week ago, they said.

There are reports that growers have already sold 50 per cent of their crop in Indonesia to traders in that country, a dealer said.

Expectations of a rise in domestic demand due to festivals and the winter season in northern India may also help pepper stay firm, dealers said.

Traditionally, demand for pepper from northern India firms up in October-November, the time for festivals such as Dussera and Diwali, a dealer said.

Demand and supply situation appears tight globally due to a 10-20 per cent decline in output in major producing countries like Vietnam and India in 2007 January-December compared with a year ago.

A report by Motilal Oswal Commodities Broker recently has put global demand at 370,000 tonnes, while supply is placed at 310,000 tonnes, leaving a gap of 60,000 tonnes in 2007.

If the present trend in demand-supply persists, pepper spot and futures may reach the Rs 14,000-15,000 a quintal levels that prevailed April-May, a dealer said.

On Tuesday, the active October contract on the National Commodity and Derivatives Exchange was at Rs 12,579 a quintal.

Garbled grade pepper in the spot market on Monday was at Rs 12,500 a quintal while no trading took place in spot Tuesday on account of the 'Janmashtami'.