Pepper bullish on static global output

Global pepper market will be more vibrant on the price front in the next season as consumption is expected exceed production, according to a latest estimates.

The supply-demand gap will widen further on account of static global production. Total production in 2008 season is likely to remain unchanged from the last year's 270,000 tonnes, while consumption is estimated to be over 300,000 tonnes. Except India, Brazil and Indonesia, where a marginal increase is expected, all major producing countries will have either a decline in production or an almost static output. India expects an output of over 50,000 tonnes.

Arrival of new crop in India and Vietnam may be delayed due to inclement weather conditions. In India, the new crop is expected to hit the market by January, a delay of 8 weeks, while in Vietnam, the arrivals will begin only by March.

The stock positions in the two country have become crucial in deciding the course of action in global pepper market.

Once the stocks in these countries are over, the market may hot up and this is expected by the end of October 2007.

According to Vietnam Pepper Association (VPA) as on August 31, total stock in Vietnam was 24,760 tonnes while the current Indian stock is nearly 12,000 tonnes. A major chunk of this has already been bought by leading exporters for their November-December export obligations. India imported only 41 tonnes from Vietnam in August against last year's 600-800 tonnes.

Total domestic consumption of seven producing countries is expected to be around 98,000 tonnes, while in the non-producing countries mainly the USA, EU, Russia, Canada, Pakistan and West Asia, consumption will be 200,000-210,000 tonnes.

The area under cultivation of pepper is either static or decreasing in major producing nations such as India and Vietnam. In India, farmers are shifting away from pepper cultivation due to lower price realisation.

According to them, the current price level is Rs 115-120, far below the remunerative tag of Rs 150 a kg. The situation was worse during 2000-2005, when the prices ruled as low as Rs 60-70 a kg.