The Hindu Business Line : Financial crisis continues to push pepper down

Kochi, Oct. 28 The pepper futures market has been severely hit by the credit squeeze, resultant the current global financial turmoil, with prices falling sharply last week despite strong fundamentals.

Imports by several major consuming countries such as the US and Germany have shown a decline and as it is a food ingredient, these countries might resort to import in the coming months.

Prices of all the contracts fell sharply on the exchanges last week. The stock market crash in tandem with the continuous fall in the stock markets world over have also contributed to the sharp drop in the pepper futures as most of the brokers are same. Investors were liquidating spot and buying back futures, market sources told Business Line. According to International Pepper Community (IPC), black pepper market remained quiet last week at most origins, affected by the worldwide economic condition.

In India, trading was limited and prices eased around 3-4 per cent. In Vietnam also the market was quiet and local prices eased daily. F.o.b prices were reportedly stable at $2,875 a tonne for black 500g/l.

It was reported that local prices in Lampung came down at the beginning of the week. Closing the week, however, the price rebounded to last week’s levels. On average, local prices in Lampung eased marginally by 1 per cent. In Sarawak, local price of black pepper eased further by 3 per cent, while F.o.b prices were reported stable. In Sri Lanka, the price eased marginally by 1 per cent. Pepper exports from the major exporters have declined in the first 9 months of 2008. The largest sufferer is Brazil and, as per the export statistics published by the Brazilian Pepper Trade Association, their export during January-September 2008 has declined by 25 per cent compared to the same period in 2007.

India's exports also have shown a significant decline of 16 per cent. Vietnam is probably the least less affected, with by a marginal reduction of 2 per cent in their exports, according to overseas reports.

US Imports

USA is the major importer of black pepper and their annual import is around 65,000 tonnes. During the year 2008 (up to August), their total import has shown a declined of 7 per cent. Import from India, Malaysia, Brazil and Vietnam has shown a decline, while Indonesia has taken advantage. import from Indonesia has more than doubled during the year. Brazil has lost around 70 per cent of their exports to USA.

It can be noted that the import of pepper from Vietnam has been on a declining trend in the last three years. In 2006 (up to August), USA imported 13,000 tonnes of pepper from Vietnam. It has come down to 5,445 tonnes in 2007 and further to 4,690 tonnes in 2008. The recent visit of a Vietnam Pepper Exporters delegation to the US needs to be viewed against this background.

German Imports

During January-August 2008, Germany has imported 18,930 tonnes (16,977 tonnes of whole pepper and 1,952 tonnes of ground pepper), showing a significant fall of 3,593 tonnes or 16 per cent, compared with imports of 22,523 mt (20,670 mt of whole and 1,852 mt of ground pepper) during the same period last year. Import of whole pepper declined by 18 per cent, while import of ground pepper increased by 5 per cent.

Vietnam and Brazil were the main source of whole pepper for Germany followed by Indonesia and India. Ground pepper was mainly supplied by Brazil and India.

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Financial crisis continues to push pepper down