The Hindu Business Line : Pepper remains outpriced; exports register drop

The chances of Indian pepper getting overseas orders are appears to be remote at present as the MG 1 remained out priced in the world market due to a strong rupee against the dollar and the rise in the futures contracts.

Indian parity fluctuated between $3,450-3,550 a tonne (c&f), while all other origins were much below this level.

Unlike other origins, Indian pepper market has an inherent strength from the huge domestic demand estimated at around 50,000 tonnes a annum. At the same time, the indigenous production continues to vacillate between 50,000 to 60,000 tonnes keeping the gulf between the supply and demand almost narrow. This phenomenon helps the Indian domestic prices to remain at higher levels.

However, farmers and small dealers are apprehensive about the entry of pepper imported cheap from Sri Lanka and other sources into the domestic market, which in would depress the market.

According to market sources, during the week 100 to 150 tonnes of 550 GL pepper has been traded from Indonesia at $3,000-3,100 a tonne (c&f) Kochi by processing industry for value addition and re-export.

The landed cost of the material is at around Rs 135 a kg. Some of the importers having “tainted image” are also said to have imported the material. Since a long rope of 120 days is available they could push part of the pepper into the domestic market.

There were reports that the output in Karnataka would be less by 25 per cent while that in Kerala is estimated to more or less at the previous levels. Thus, the overall production is estimated to be somewhere around 55,000 tonnes, according to trade estimates.

Imports during April-October 2009 via Kochi port have surpassed the exports of pepper through this port. Imports were at 10,911 tonnes as against 10,454 tonnes in the same period the previous fiscal. When the arrivals via other ports are included the imports might be much higher, traders claimed.

Total pepper exports from the country during April-October 2009 stood at 11,500 tonnes as against 14,750 tonnes. Rise in the Indian parity and undercutting by other origins might be the reasons for the decline.

Imports by the US during January–September 2009 from India dropped to 5,207 tonnes from 7,368 tonnes in the same period in 2008.

Reports from the overseas markets are confusing, while the futures market here is highly volatile as it is controlled by the bull and bear operators who push and up and pull down the market without any fundamental reasons, they said.

Last week the market witnessed an upsurge. December, January and February contracts went up by Rs 251, Rs 286 and Rs 331 respectively to close at Rs 15,360, Rs 15,610 and Rs 15,811 a quintal at the weekend close. Total turnover during the week increased by 35,617 tonnes to 64,675 tonnes.

Total open interest went up by 1,421 tonnes to 12,699 tonnes. December open interest fell by 1,899 tonnes while that of January increased by 2,973 tonnes at the weekend close.

Spot prices in tandem with the trend in the futures market increased by Rs 300 a quintal to close at Rs14,400 (un-garbled) and Rs14,900 (MG1).

Domestic demand has shown signs of picking up in recent days and it is likely to gain strength in the coming days, trade sources said.

Indian parity in the international market has dropped to $3,400 a tonne (c&f) at the weekend close, but, still remained out priced, they said.