Pepper to remain bearish

The bearish trend in the black pepper market is likely to further aggravate because of weak overseas demand, especially from Europe and the US, over the last 3-4 weeks. Although the Indian exporters have tried hard to attract foreign buyers by slashing prices, demand has not picked up.

Despite lowering the tag for the ASTA grade by $150 to $3,650 per tonne (fob Kochi), the move has failed to attract buyers.

Leading Kochi-based exporters told Business Standard that unless there were overseas or domestic orders by mid-August, the market might face a real crisis and the price tags could touch rock bottom in the current season.

As on July 30, the three national commodity exchanges have a total valid stock of 13,447 tonnes, which has weakened overseas and domestic buying. With Europe and the US keeping away from the market, Vietnam, the world's largest pepper producer, was also forced to reduce their tags considerably to $3,600 for ASTA (fob HCM City), lower by $200 from last week. For 500 GL and 550 GL, Vietnam is quoting $3,240 and $3,380 (fob HCMC), respectively.

While Indonesia is currently not quoting prices for ASTA due to the strong bearish trend in the global market, Brazil, which has started harvesting the fresh crop, is offering BASTA in the range of $3,750-$3850 (fob Belem) for the August and September shipments.

The start of the season in Brazil has been cited as the major reason behind the slow down in buying by Europe and the US. The country is expected have a total production of 40,000 tonnes, which will further strengthen global supply.

Coupled with the huge carry over stock, the pepper supply is expected to be plentiful and enough to overcome the 15-20 per cent shortage in global production projected in the current year.

According to a leading exporter, the US and European buyers were putting pressure on Indian and Vietnamese markets by keeping away. Domestic buying which is expected to pick up by the end of August will also be a crucial factor in determining the course of the Indian pepper mart.

It is likely that a major chunk of pepper will be bought by north Indian traders for the coming winter season. But experts fear that the bearish mode may continue as indicated by current global trends.