Growers and traders in Vietnam, the world's largest pepper producer, are in panic as selling pressure is mounting every day, according to reports.
The country has slashed the price tag of ASTA grade of pepper by around $150 per tonne to $3,700 (free on board HCMC) last week, still the off-take has been thin from Europe.
Price tags of 500 GL grade has been lowered to $3,100-3150 per tonne and 550 GL is currently quoting around $3,300-3,350. Indian overseas traders offered MG-1 grade at $3,600, but the US buyers have totally withdrawn from the market. According to top Indian exporters, the spice is having limited buying interest from West Asia.
The US withdrawal from global pepper market has visibly upset Vietnam traders as they expected appreciation in prices this month.
According to various reports, there would be a shortfall in production in the current year and the consumption figures would certainly be more than production.
So Vietnam has not released much of its stock, when India and other countries sold aggressively. Exports from Vietnam during January-April is estimated at 21,608 tonnes and the country has a valid stock of 85,000 tonnes, including carry-over stocks.
With US importers not active in the market, traders in Vietnam have been badly hit. Poor off-take has created a panic situation there, hence the prices have slipped.
It is also learnt that high interest rate in Vietnam is a serious concern as a major chunk of traders operate with heavy bank loans. So they have to sell pepper, otherwise it will be a financial disaster for them, a leading exporter told Business Standard.
Meanwhile, Brazil and Indonesia remained almost steady on the price front. Brazil offered BASTA at $3,575-3,650 per tonne and 560 GL at $3,475-3,550 (fob Belem).
A section of the Indian exporters feel that the current downward trend would not last long because of strong fundamentals, such as lower output this year and record exports by India in 2007-08 (35,000 tonnes), almost after a decade.
The mismatch between demand and supply will be a reality after June and a much stronger dollar will also enthuse the market in the longer term.
