Supply squeeze likely to keep pepper market hot

The Indian pepper market continued to remain highly volatile. Last weekend witnessed the market moving up sharply without any link to the market fundamentals. There were no overseas demand given the high price for Malabar on the one hand and limited activities in the markets in the US, Europe and Canada on account of the summer vacation. Therefore, no activities in the overseas markets are likely on the export front for about a fortnight.

However, there might be some stray business taking place from certain pockets for Malabar provided the difference between the parity for MG1 and other origins are not above $200 a tonne, market sources said. Decline in output in Indonesia in its July/August crop coupled with exports of huge quantity from Vietnam during the first seven months might lead to a supply squeeze in the international market for the coming five months. Such a scenario could keep the market hot for some time to come this year, sources told Business Line .

Meanwhile, availability in India is also limited. Growers and primary market dealers are not showing any interest to part with their produce at the current levels, sources said. As prices were ruling higher not much inventory were created by domestic dealers. They may enter the market in the coming days as the festival/winter season begins. The fate of the next crop would be known only after the southwest monsoon, they said.

Bull operators were on the driving seat and the market went up sharply during the week. August, September and October contracts went up by Rs 1,208, Rs 1,347 and Rs 1,224 respectively to close at Rs 29,593, Rs 30,161 and Rs 30,503 a quital.

Total turnover increased by 9,966 tonnes to 50,365 tonnes. Total open interest went up by 736 tonnes to 13,951 tonnes.

Spot prices, also in tandem with the futures market trend and on good buying support amid limited supply, shot up by Rs 1,100 a quintal during the week to end on Saturday at Rs 28,000 (ungarbled) and Rs 29,000 (MG 1) a quintal.

Overseas trend

The black pepper market showed a mixed response last week, when compared with prices in the previous week, according to the International Pepper Community (IPC).

At the Commodity Exchange in India, prices of Malabar black moved up steadily throughout the week. On an average the increase was around 2-3 per cent.

Local prices in local currency were reported stable in Lampung, Vietnam, Sarawak, Brazil and Sri Lanka.

.

Local prices of white pepper were stable at all origins. A marginal increase of fob prices took place in Bangka and Sarawak, while in Vietnam the price was stable.

Indonesian exports

During January-June 2011, Lampung has shipped 14,760 tonnes of black pepper, as against 12,030 tonnes in the same period of last year. In the second half of the year however, export of black pepper from Lampung is estimated to be lower than the corresponding period, due to lower crop this year.

Compared with the exports in the previous two months (April and May 2011), a substantial drop in exports were demonstrated in June with a continuous decline of export in the past three months. Large export in April 2011 was due to unusual crop during March 2011 in East Lampung, as a result of climate change. Harvest in main season of July/August is estimated to be lower.

Indonesia exported 49,000 tonnes of black pepper in 2010. Out of this, Lampung contributed 47,900 mt (98 per cent).

COMMENT NOW