Vietnam pepper futures end higher on tight supply

Pepper futures during the week witnessed the usual “tug of war” between the bull and bear operators and after remaining volatile throughout the week on the exchanges, all contracts ended above the previous weekend closing.

Pepper futures during the week witnessed the usual “tug of war” between the bull and bear operators and after remaining volatile throughout the week on the exchanges, all contracts ended above the previous weekend closing.

The fundamentals were strong and it was evident from the price trend so far in other origins.

Vietnam, which has already sold out much of its crop, is not offering Asta grade pepper.

The upsurge in the white pepper price, which is taking it to over $6,000 a tonne, is said to have prompted the Vietnamese growers to convert the bold berries into white pepper.

The conversion cost there is comparatively much lower, when compared with other producing countries, and hence, it was considered as a lucrative proposition, market sources told Business Line.

Consequently, stocks of Asta grade black pepper in Vietnam are said to be already depleted.

Therefore, Vietnam has been quoting higher.

Indonesia is reported to have sold out much of its new crop while the growers are not ready to sell at the current rates, which they claim are at lower levels, and hence, the prices are likely to move up, International Pepper Community (IPC) reported.

Brazil, where harvesting is underway, is also reportedly firm.

Indonesian market is closed for Ramzan/Eid-ul-Fitr holidays till Tuesday. US markets are also partially closed on account of the Jewish New Year.

The north Indian market during the week was on a holiday mood because of various religious festivals.

However, demand from domestic and overseas markets would emanate in the coming days for the festival and winter season, Christmas and the New Year.

Squeezed

Pepper availability, at present, in India is said to be only on the exchange platform. Physical pepper supply from the primary markets is totally squeezed.

It is either because of non-availability or because those holding the iron stocks do not want to sell at the current price. They may probably be hoping that the prices might touch Rs 300 a kg.

Meanwhile, the Indian pepper output, of late, is nearly stagnant at around 50,000 tons and it is likely to be less this year also.

According to a major pepper grower in Wayanad, which produces around 10,000 tons of pepper, the output this year is going to be lower by around 30 per cent. The reasons attributed by a farmer, Mr Sainalubdeen of Meenangadi, are deficient monsoon rains, diseases such as quickwilt and yellowing of leaf. He said that the revival programmes launched by the Centre had not yielded any positive result so far.

According to growers in Wayanad district, conversion of vast tracts of land under the crop on the highway sides for more lucrative commercial purposes has led to shrinkage of pepper plantations, as its cultivation, of late, is found to be a loosing proposition.

A similar situation is emerging in Pathanamthitta and Idukki districts also, where pepper is replaced with highly remunerative rubber and cocoa, Mr Joshua Daniel, a major pepper grower who had converted 25 acres of pepper plantation to rubber recently, told Business Line.

High cost of production in Kerala, mainly because of the exorbitantly high labour cost and other inputs, apart from high land price, has made pepper cultivation economically unviable even at the current price of Rs 200 a kg, growers claimed. At the same time, “gambling in the futures market has been depriving the growers of better prices”, they alleged.

If the present trend continued, Kerala would be losing its position as a major grower of pepper, as happened in the case of cashew and coconut, they said.

The September, October and November contracts were up by Rs 329, Rs 239 and Rs 289, respectively, to close at Rs 20, Rs 772, Rs 20, Rs 881 and Rs 21,022 a quintal at the weekend close.

Total turnover dropped by 52,026 tons during the week to close at 57,806 tons. Total open interest increased by 1,448 tons to 18,105 tons.

Spot prices increased by Rs 200 during the week to close at Rs 19,900 (un-garbled) and Rs 20,400 (MG1) a quintal at the weekend close.

Indian parity in the overseas markets was at $4,650 a ton (c & f) and remained slightly above other origins.

Tags: Vietnam Pepper, Vietnam Pepper prices