G.K. Nair

Kochi, March 15

PEPPER prices ruled steady on reports of drought in Vietnam and procurement by Government, which has led to sharp decline in arrivals at the terminal market here.

The State procurement agency, Kerala State Co-operative Marketing Federation (Marketfed), is said to have procured around 3,500 tonnes of pepper so far.

Market sources told Business Line that this phenomenon had squeezed the supply.

Add to this, reports of severe drought in Vietnam - said to be the worst in 28 years, and has affected its eight highlands provinces - have also contributed to the upward swing.

The sources also said Vietnamese pepper production this year was likely to be less by 20-30 per cent.

Production in 2004 was estimated at 85,000 tonnes and it was expecting a higher crop this year as the productivity has been increasing at around 2.5 tonnes per hectare.

However, most of the international players who have gone short seem to be not ready to accept the reports on the drought in Vietnam.

Some of the market players said the areas hit by the drought are mainly coffee plantations.

The drought is said to have affected one million people while the crop losses are estimated at $80 million.

Increased border trade with China and some buying interest from some of the Gulf countries have pushed up prices in Vietnam.

The rising coffee prices appear to have motivated the pepper growers to hold their produce in anticipation of higher prices later, they said.

International players are closely watching the market trend in Vietnam, as it has not eased despite the beginning of the harvest.

Vietnam exported 98,494 tonnes of pepper in 2004 against 74,635 tonnes in 2003, according Vietnamese Pepper Association.

It is said to have set a target for high-quality products at 40 per cent of the total exports of pepper in 2005.

Prices in Indonesia have also moved up. Indian pepper continues to remain outpriced.

In the domestic market, the buyers are not keen to buy because of the uncertainty over the VAT, according to the sources.

Besides, March delivery is outstanding, involving huge quantity of pepper in some of the exchanges.

Spot price on Tuesday for MG 1 was Rs 6,900 a quintal, while that for ungarbled was Rs 5,400-6,400. Futures prices were March Rs 6,943 a quintal, April Rs 7,399, May Rs 7,269, June Rs 7,437, July Rs 7,177 and August Rs 7,639.

(This article was published in the Business Line print edition dated March 16, 2005)
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