Pepper falls on subdued demand

Black pepper spot prices and futures continued to trade lower owing to dull demand from the domestic and overseas buyers on Tuesday. Indian pepper prices in the international market are being offered at $5,175/tonne. (Source: HIndubusinessline-14.03.2011).

Harvesting in Vietnam has commenced and the prices offered by them in the international market for their 550Gl are around $4,940/tonne (f.o.b) HCMC. Arrivals are likely to gain momentum by March. In the first month of this year pepper exports from nation was around 7,000 tonnes. According to the Ministry of Agriculture and Rural Development (Vietnam), pepper exports in January year on year jumped by 40.7 per cent despite a decrease of 7 per cent in volume (Source: Peppertradeboard).

According to International Pepper Community (IPC) report, export of black pepper from Malaysia in 2010 surged by 7% and stood at 14,075 mt as compared to 13,123 tonnes in 2009. Japan was the major importer of Malaysian pepper.

Import of Pepper in U.S. in 2010 gained by around 7% and stood at 70469 tonnes as compared to 65,855 tonnes in 2009. Indonesia held its position of being the largest exporter shipping around 25,174 tonnes to U.S. followed by Brazil (11,517), Vietnam (10,241) and India (4,064) tonnes.

Production and Arrivals

Arrivals of pepper in the domestic mandi stood at 25 MT as compared to 23 MT on Monday. Offtakes reduced to 20 MT from 37 MT on Monday.

Production of pepper in India in 2010-11 is projected to be 48 thousand tonnes (according to the Spices Board) as compared to 50 thousand tonnes last year. However, there are expectations that this estimate would be lowered further on account of the disease attacks and erratic rainfall in the major growing areas particularly Kerala and Karnataka.

In the international pepper markets too output is expected to decline this year. Black pepper production in Vietnam, the largest pepper producer, is likely to be lower by around 9 percent at 1 lakh tonnes as compared to 1.10 lakh tonnes in the previous year.

Pepper production in Brazil stood around 27,000 tonnes in 2010-11 as compared to 35,000 tonnes the previous year.

Outlook

Pepper prices in the intraday are expected to trade bearish owing to lacklustre trades at the mandi. Prices will also take cues from fresh arrivals of pepper in Vietnam which may gain pace in the coming days.

In the short term (March), Pepper prices will depend on demand from the overseas and domestic market and fresh arrivals in the physical mandi in Kochi. Prices will also take cues from pepper prices in the international market of various origins particularly India, Vietnam, Indonesia and Brazil.

In the medium to long term (April onwards), price trend will depend on pepper stocks with Indonesia and demand from the overseas and domestic buyers.