An unexpected strong resistance from pepper producers across the globe has created fresh buying interest from traditional buyers especially in Europe and US. Producing countries like Vietnam and Malaysia have adopted a strong stand not to sell pepper at lower price tags, though the EU nations and US are reeling from economic recession.
A strong buying support from China has provided a fresh leap to the Vietnam market as China is expected to have a supply shortage in the current year. According to reports, production in China would drop by 60 per cent in 2009. Unconfirmed reports said that China, one of the major producers of white pepper in the world, had planned to buy at least 10,000 tonnes from Vietnam and these reports have totally changed the market situation in Vietnam.
Citing reports on the global economic turmoil, EU and US buyers were backing out of the market and this made a strong bear phase in the global pepper market a few weeks ago. But strong buying interest from non-traditional buyers like Japan, Taiwan and Korea has created fresh enthusiasm in producing countries especially, India and Vietnam. Malaysia is topping the price table with $2,850 a tonne of ASTA grade (FOB Kuching) with India at $2,200 (FOB- Kochi) and Vietnam at $2,175 (FOB-HCMC).
Countries like Vietnam and Indonesia had quoted price tags below $2,000 two weeks ago due to the global economic turmoil.
All the leading buyers had withdrawn from the market keeping their inventory at a very low level. Most buyers from EU and US have not been active since December 2008. This actually made them run out of stock and according to leading exporters, they had to come to the market as quickly as possible.
Strong buying interest shown by China, Japan, Korea and Taiwan made the panicky as growers are reluctant to release their stocks at lower tags.
In India supply of fresh season’s pepper is one of the lowest in last three decades, said leading traders. As the harvesting season in Kerala is at the fag end the local terminal market has got hardly 500 tonne in these days.
According to them, although it would be one of the lowest in recent years, total production in Kerala would be more than 10,000 tonne. Yet the supply to terminal market is very poor. This indicates stocking of pepper is strong in almost all parts of the state. Growers said whatever might be the deflationary pressure due to recession, they were not ready to sell the stock immediately. Farmers are not in a mood to get rid of the stock at un-remunerative price tags. This made a turnaround in global pepper mart and there is fresh hope among farmers world over. Indonesia which offered $ 1900, couple of weeks back in now quoting $ 2000.
So the latest trend on the price front and supply side is forcing the traditional buyers to intervene the market strongly. A section of the Kerala growers said that the market would have strong bull phase once the harvesting season is over as inventory in both Europe and USA is rather very low. So the game plan of US and EU buyers to crash the market will not work out effectively. Fresh buying support from non-traditional markets is an additional boost to the producing countries.
