Global pepper prices decline on rise in sales by Indonesia

Written by RajeshRavi | Kochi | Updated: Aug 1 2012, 06:11am hrs
Global pepper prices are on the decline due to active selling by Indonesia and sluggish demand from US and Europe.

Meanwhile, the Indian market has taken a dip in the last few days due to profit booking, but traders maintain that the market has de-coupled from the global trend and would continue to remain firm on lower production.

Indonesians are selling very actively and reports say that their crop is more than 50,000 tonne. This could have selling pressure on Malaysia and Brazil and lead to a weak market, said Jojan Malayil of Kochi-based Bafna Enterprises.

Vietnam has 50,000-60,000 tonne of pepper. It is mostly in the hands of farmers who are reluctant to sell, as they are cash rich from the sale of other commodities like coffee. The market would depend on their strategy, he added. Global demand is also on the lower side due to continuing economic problems, Johan said. US consumption of pepper is lower by 22-24% for the year while European consumption is lesser by 40%, he added.

Buyers and sellers are reluctant to trade in the current scenario where currencies of most the countries are volatile and reports of default by buyers are coming in from the West Asian market.

Faiyaz Hudani of Kotak Commodity Services to feels that the global market is weak due to selling pressure from Indonesia and Malaysia. Indonesia is quoting very low rates putting pressure on other sellers. The market would remain weak due to good supply and lower global demand, he added.

However, he is bullish on the Indian market due to lower supply and robust demand. Jojan too believes that the Indian market has completely de-coupled itself from the global trend and is in its own trajectory and driven by speculation from the exchanges.

K Satheesh Babu of Agricultural Market Intelligence Centre (AMIC) of Kerala Agricultural University feels that the Indonesian pepper production has been overstated. Indonesia has the same tropical climate as India and other countries. Climatic changes affect these nations similarly and they are also bound to have the ill effects of erratic climate, he said. He is bullish on the Indian marker irrespective of export demand. Festival and winter demand from North India will keep the market firm. Indian supply is limited and the market will surge, he added.

He feels that the global market would stabilise as US and Europe starts buying for the December celebrations and holidays, starting from September. According to the reports of International Pepper Communitys (IPC),

Indian production was projected to decline by 5,000 tonne to touch 43,000 tonne during 2012.

The country is estimated to import 14,000 tonne of the commodity and export nearly 21,000 tonne. It still remains the largest consumer of pepper from the producing countries with domestic consumption estimated at 40,000 tonne.