Uncertain global economy may dampen pepper trade

Written by RajeshRavi | Kochi | Updated: Jun 26 2012, 08:54am hrs
Prevailing uncertainty in the global economy is likely to lead to lower global trade of pepper in the current season, traders said. 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. International Pepper Community's (IPC) had projected a global trade of 2,46,045 tonne in 2012 against 2,42,250 tonne in 2011. Internal consumption by the producing countries during the year 2012 is projected around 124,870 tonne.

Demand is sluggish and sellers are holding back the crop. Pepper trade is passive and only small volumes are being traded and that too sporadic, Jojan Malayil of Kochi based Bafna Enterprises said. Angel Broking reports that pepper imports by US the largest consumer of the spice declined 14.8% in the first two months of the year to 8,810 tonne compared with 10,344 tonne in the same period last year. It adds that exports of pepper from Brazil during January-May 2012 stood around 3,736 tonne, which is lower by around 21% compared with last year.

There is resistance to the prevailing price in the global market, but sellers like Vietnam are not concerned. They are holding on to the crop despite advice by the government to dispose in a strategic manner. Indonesia is also not aggressive despite reports that it has good crop which is close to 35,000 tonne, Jojan said.

P Nandakumar, a trade consultant from Kochi feels the uncertain exchange rates are troubling. Imports by processors are not covered because they are waiting for the market to decline. Sellers have booked dollars in advance and are not able to cash in on the strengthening of the dollar, he said, adding, It is bad time for global trade and it is likely to come down. Even the African and West Asian market are also seen affected by the problems.

Jojan believes 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. Angel reports that India is offering pepper at $7,500 for a tonne while Vietnam is offering its 550 GL at $6,750 per tonne and Brazil at $6,600 per tonne. Pepper prices in the coming week are expected trade sideways or move up owing to improved buying by the local stockists amidst lower arrivals, Nalini Rao, research analyst at Angel Broking added.

Pepper spot prices at the NCEX counter stood at R40,435 per quintal as on Monday evening.