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G.K. Nair

Kochi , March 20

PEPPER prices moved up on reports of decline in production in Vietnam due to severe drought there and thin supply position here owing to procurement by Government agency.

Spot prices as well as futures continued to show an upward trend. Spot prices for garbled was Rs 7,100 a quintal as against Rs 7,000 on last Monday while that of un-garbled Rs 5,600-6,600 as against Rs 5,500-6,500 on March 14.

Futures prices on Saturday were April Rs 7,548 a quintal as against Rs 7,399 on last Monday. May Rs 7,475 (Rs 7,328), June Rs 7,649 (Rs 7,497), July Rs 7,375 (Rs 7,229) and August Rs 7,857 (Rs 7,701).

Conflicting reports of drop in pepper production in Vietnam coupled with the Kerala Government's procurement exercise has changed the sentiments of the farmers "who are now not in a hurry to sell their produce". This has resulted in a squeeze in supply, market sources here told Business Line.

The doubts in the minds of traders that they might have to pay four per cent tax on the stock held by them as on March 31 said to have forced them to liquidate the stock and not to engage in any fresh buying. Those dealers who do not hold any stock are buying to meet their immediate commitments. In fact, if the Government had made it clear that VAT would be levied only on fresh buying from April 1, the traders/dealers would have jumped into the market at this juncture.

If the Kerala Government wanted to levy VAT on stocks of pepper held by the traders as on March 31, the State-owned pepper procurement agency, Kerala Cooperative Marketing Federation (Marketfed), would have to dole out large sum towards VAT as it has already procured over 3,500 tonnes of pepper at Rs 75 a kg.

International players are waiting for the global market to settle. However, the reported trend in Vietnam reflects the likely weak production position there. The farmers there do not seem to be in a mood to release their new crop anticipating a price increase. Vietnam has already raised the price of 500 GL to $1,260 a tonne from $1,140 a tonne. Indian MG 1 is offered at $1,700 a tonne. While Sri Lanka was offering at $1,400 a tonne and imports from Sri Lanka are said to be on the rise and catering to the domestic demand, the sources alleged.

Meanwhile, Vietnam Pepper Association said to have confirmed that the prevailing severe drought conditions in that country had negatively affected some of their pepper plantations. According to Senior Spices Board sources here, IPC had also predicted a 10 per cent fall in the production in Vietnam based on its initial assessment of the damages to pepper vines.

Last year, pepper production in Vietnam was estimated at 95,000 tonnes and with a 10 per decline this year it could be around 85,000 tonnes this year. But some put the decline at 20-30 per cent while the international players who do not want the world to know the real position are saying that the production would be around one lakh tonne in 2005.

The Indian production, according to traders' estimate, is to be around 75,000 tonnes. The carry forward stock is estimated at 20,000 tonnes as against last year's production of 55,000 tonnes and a carry forward stock of 15,000 tonnes, the sources said.

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