Rally in pepper mart headed for correction

The domestic black pepper market that had remained buoyant for the last three months was now poised for a correction, which is due, traders said. Prices have doubled during the period, with MG1 "� the best quality pepper "� currently selling in the Rs 13,400 a quintal range in the spot market.

Sources in the market said speculators, who took advantage of the bullish sentiment during the last 10-12 weeks, played a key role in the spiralling of the spot prices.

Further, an uptrend in futures trading had also acted as a catalyst in the recent rally in the spot market, they added.

Exporters said the ongoing bull phase was expected as the global pepper market too had been on an uptrend driven by several factors.

The rise in prices of white pepper, which always influences black pepper, worldwide, was one of the key drivers.

In the last few days, however, the local market has been witnessing a reverse trend which, the traders believe, may lead to a correction within a few weeks.

One reason is that China has, of late, started offering white pepper at $3,500 a tonne, sharply down from $4,000 levels at which it offered the spice a week earlier. Incidentally, China's white pepper offering is at par with the black pepper prices of both India and Indonesia.

According to a recent estimate, China is likely to produce 40,000 tonne white pepper and the price of the commodity may go further down as there will be an acute pressure on other producing nations such as Indonesia and Vietnam.

Taking a cue from the Chinese pricing strategy, Indonesia, too, has slashed its white pepper price to $4,150 (from $4,400 levels last week) and Vietnam to $4,050 ($4,150). And this reversal in the pricing of white pepper is bound to affect the black pepper market too.

In an indication of a worldwide correction, Brazil has slashed the price of B1 ASTA to $2,700 a tonne, from $2,850 last week.

Market experts said the country was facing heavy selling pressure as its harvesting was in full swing now. One of the reasons behind the selling pressure was that re-sellers offered pepper at lower prices in US markets, forcing the Brazilian exporters to reduce their prices.

Besides, according to the same estimate, Brazil will have a better production of 38,000 tonne this season. So, all current indicators suggest that the ongoing rally slow down soon.