Global demand for pepper has dropped to alarming levels, forcing sellers to lower their prices, traders said. European and US buyers are keeping their inventory at the minimum and buying in smaller lots. Traders feel that global demand could decrease with households across the world adjusting their budget to the slowdown.
“Vietnam, Brazil, and Indonesia are showing willingness to sell at lower levels. Sellers are worried about a fall in consumption and want to sell before the new crop arrives in India and Vietnam,” P Nandakumar, a trade consultant, told FE. Prices of the more sought after white pepper has also dropped, sending negative signals in the market, he said. “While the US is worried about a general drop in demand, other countries are concerned with their currencies fluctuating with respect to the US currency. Since most of the trade is dollar denominated, traders are concerned.”
The Indian market is sending conflicting signals with the futures easing down slightly, taking global cues, while the spot market rate is seen higher. However, most of the traders feel that the exchanges do not reflect the fundamentals as the supply has fallen sharply. “Spot market availability of the commodity is at an all-time low. But the prices quoted at exchanges do not reflect the physical market reality,” a trader at the terminal market of Kochi said. It is impossible to buy pepper from trading centres like Rajakkad, Ponukunnam, and Sultan Battery, he added.
Depreciation of the rupee with respect to the dollar and the easing of the market could help India export more, but demand is weak. While India remains the cheapest origin, exports are not showing signs of recouping and may end up lower than the last fiscal. Domestic demand is likely to taper down after the festivals, with households curtailing consumption, a trader said. Importers may prefer to wait for estimates of Indian and Vietnam crop before entering into large contracts, he added.