World pepper trade to witness high volatility

Kochi: The pepper market the world over is likely to witness high volatility in the later part of this year and in 2011 due to a squeeze in availability as the global output does not seem to grow corresponding to the world demand.

The production next year according to the International Pepper Community (IPC) projections is at 309,952 tonnes as against 316,380 tonnes estimated for 2010. The exportable quantity will also be less at 229,710 tonnes as against 237,650 tonnes this year.

The carry forward stocks from this year to 2011 are also comparatively less from that of 2009 to 2010. It is estimated at 94,582 tonnes as against 95,442 tonnes in 2010.

But, experts from the world market disagreed with these figures saying none of the producing countries would be holding such huge quantities of pepper when the prices have been ruling very high all these months. They are of the view that the figures released by the IPC relating to carry-forward stocks do not seem to be factual.

For instance, they said, Malaysia has shown a carry-forward stock of 25,225 tonnes from a total production of 25,700 tonnes and that too after exporting 21,950 tonnes.

Since prices have been ruling higher for the past several weeks such huge stock is unlikely to be held by any of the producers. Similarly, Indonesia’s stocks have been put at 5,300 tonnes, which is also disputable as its figures often turned out to be wrong in the past.

According to the experts, it might be more and not less than 15,000 tonnes. The case with Brazil and others is also not different. Therefore, according to them, the carry-forward stocks may be somewhere between 75,000 and 80,000 tonnes and of this some 35,000 to 40,000 tonnes would be “iron stock” which may not come out for some time to come.

What is surprising is that there has not been any mention about the growth in global consumption. The Spices Board was quoted as saying that there is an annual demand growth of 5 per cent. It should be by all means moderate given the rise in domestic consumption in the growing countries and gradual increase in the per capita consumption in several traditional and non-traditional countries.

For instance, Indian consumption is estimated at somewhere between 40,000 and 45,000 tonnes a year.

The average world consumption is estimated at somewhere between 20,000 tonnes and 25,000 tonnes a month and at this rate, the global consumption demand is likely to be between 2.4 lakh tonnes and 3 lakh tonnes. The domestic consumption is 2010 is estimated at 131,722 tonnes, which is projected to be less at 125,202 tonnes in 2011.

These projections are also said to be not based on correct market assessment, trade sources told Business Line. According to them, some of the major producing countries are proved to have been misguiding the market by giving out wrong projections about production and exports and that, in turn, deprived growers of remunerative prices.

In fact, the IPC should have a mechanism to assess the actual crop position in each member country, their actual domestic consumption, exports, and the global per capita consumption and the demand so as to know the factual demand – supply scenario as it should determine the prices and not by market manipulators and operators, they said.

The tight supply situation has been keeping the prices of all the origins at higher levels. However, the bear operators in India, allegedly not following the market fundamentals, had managed to bring down prices during the week to $5,000 a tonne (c&f) and consequently, “it is very much in line with other origins brightening the chances of some orders coming to India on Monday,” market sources told Business Line.

All the contracts fell marginally during the week. November, December and January dropped by Rs. 198, Rs. 153 and Rs. 90 respectively to close at the weekend at Rs. 21,198, Rs .21,588 and Rs. 21,831 a quintal. Total turnover dropped by 4,653 tonnes to 84,528 tonnes and total open interest declined by 438 tonnes to 14,059 tonnes. Spot prices in the absence of any buying and selling remained unchanged at Rs. 20,500 and Rs 21,000 a quintal.

The black pepper prices during the week, according to the IPC, have increased in the domestic as well as international markets. In India, it said, activity has increased and futures prices at the Commodity Exchange moved up by around 1-3 per cent. In Daklak, Vietnam, pepper prices for raw material stood at VNND 85,000 a kg during the week, recording a significant increase of VND 10,000 from VND 75,000 a kg in the last week. In Lampung, the price was higher by 3 per cent and 1 per cent increase was recorded in Sarawak. A sharp increase of 10 per cent was also reported in Sri Lanka.

In Bangka, local prices of white pepper increased almost daily. On an average, prices increased by 6 per cent and 2 per cent for local and fob respectively from last week. A marginal increase has also taken place in Sarawak.

During January-September 2010, total export of pepper from Vietnam was at 95,613 tonnes, registering a significant fall of 11 per cent as against the shipments of 107,946 tonnes in the same period last year. It is estimated that export from Vietnam would be around 100,000 tonnes this year.

(The Hindu Business Line)