Artificial spurt in futures hits pepper market

Rising speculation in the futures trading has hit the black pepper market for the last couple of months. The speculative transactions had serious impact on the spot market, pulling down prices by Rs 200 a quintal to Rs 6,450-6,850 within ten trading sessions.

Jojan Malayil, a leading exporter and former president of India Pepper and Spice Trade Association (IPSTA) said an "artificial spurt" in all the contracts between December 2005 and June 2006 had a negative impact on the domestic market. The country seems to have lost advantage in the export market, though temporarily.

The low stock position in Vietnam during December-January gave India an edge in the global market, but rising prices have played spoiltsport, he added.

Vietnam still offers pepper at cheaper prices of $1,230 a tonne for 500 gmiter, $1,300 (550 gmiter) and $1,380 for ASTA, but the domestic MG1 grade has an advantage in the international market even if the price levels are slightly higher. However, the current Indian parity is $1,600 which is not priced strategically, according to exporters here.

A group of US experts said Vietnam had exported pepper to the tune of 95,000 tonne during January-December 2005 though the official figure stands at around 1,05,000 tonne. According to them, Vietnam still has stock of 15,000-20,000 tonne and hence, is offering pepper at lower price tags.

During December 2005 alone, Vietnam exported 6,500 tonne, while Indian exports stood below 1,500 tonne even with the advantage of export subsidy.

It is evident from the current global market situation that export subsidy is a futile exercise since pepper is easily available at an average price tag of Rs 6,000 a quintal. Brazil offers ASTA for $1,400 while the Indonesian offer is pegged at $1,425. Brazil quotes B1 grade at $1,350-1,375, but the Indian price is higher by $175 a tonne.

Meanwhile, Sri Lanka has been active in the Indian market during the last couple of weeks and sold stocks at $1,425 a tonne. Traders said stocks have been piling up to the tune of 7,500-8,000 tonne.

Meanwhile, the US had imported 46,840 tonne black pepper between January and November 2005, while 2004 figure was 45,374 tonne in the same period.