The Hindu Business Line : Indian pepper turns out to be most competitive

Kochi, March 19 The reported squeeze in availability of heavy pepper (Asta grade) in other origins, especially Vietnam where harvesting is in full swing, has placed Indian pepper at an advantageous position to ship out MG 1, which has turned out to be the most competitive in terms of price and quality at present in the world market.

New phenomenon

Futures trading below the spot prices when the contract is nearing maturity has become a new phenomenon in the exchanges consequent to selling pressure from some of the multinational corporations and national level cooperatives which are ready for delivery and get out of the market.

As a result, the exporters are covering from the futures market at low prices and hence, they are able to offer at competitive prices to the overseas buyers, according to Mr Kishor Shamji, former President, India Pepper and Spice Trade Association (IPSTA) and an exporter. According to him, “when nearing maturity both the futures and spot prices should have to be in parity”.

Futures trading below spot could also be attributed to the apprehension about the quality of the materials to be delivered. On the other hand, those holding positions are not sure about getting their stocks revalidated. Add to this may be the liquidity crunch because of the downward trend in the stock market is forcing the players to sell. The players hold membership in commodity as well as equities market. The tug of war between the bull and bear speculators continues to keep the market highly volatile and since the bears have an upper hand, the prices continued their downward trend.

Sold out

On other hand, in the other origins availability of Asta grade pepper is limited. Indonesia and Brazil appear to have sold out their produce from the previous crop as their harvesting was in August and October-November. Then the remaining sources are India, where harvesting is in the final phase and Vietnam where harvesting is in full swing. Farmers in the latter are reportedly not ready to release their produce as their similar strategy succeeded last year.

Short supply of white pepper from the major producer, Indonesia, where the farmers have shifted to nickel mining, has led to an upsurge in its prices in the world market. This, in turn, has encouraged Vietnam to convert its heavy pepper in to white creating a squeeze in the availability of the Asta grade pepper. Vietnam was offering its white pepper at $6,075 on Wednesday as against Indonesia’s $5,850 - $5,900 a tonne.

Though V Asta prices have eased marginally, they still continued to be above $4,200 a tonne (c&f) as against India’s $3,900-3,950 a tonne (c&f).

Opportunity

Given this scenario India has a golden opportunity, at present, to market its MG 1 in the overseas markets. The US buyers who have been waiting for the Vietnam prices to decline are likely to turn towards India now. Even multi-origin operators are trying to buy from India MG 1 and it is nothing but a clear indication of the tight supply position of Asta grade in other origins, official sources pointed out.

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