PEPPER MARKET - WHY SO VOLATILE ALL OF SUDDEN

The 37th IPC meeting held earlier this September in Sri Lanka has come to a conclusion that a general global decline in pepper production should be expected in in 2007.

This conclusion justified the bullish market trends. Actually we´ve witnessed a long time orchestrated efforts for market recovering from a 7 years long depression, since Vietnam decided to invest seriuosly in the pepper industry.

In the chart below we may see the prices /production behaviour before and after Vietnam entering the world market.
In few years Vietnam became the biggest and the cheapest producer and exporter responsible for half of the pepper in the world.

This brilliant strategy gave the market a long time not seen stability even at low prices and made most of the competition to become less atracted by this industry searching alternatives crop that would pay better pricing.

Once consolidated his placement in the market Vietnam authorities improved programs targeting a better pay-off for its pepper plantations improving quality and value-added products like the white pepper.
It also worked, helped by a favourable world dituation and in the year of 2006 they conquered the American market. Not only this but Vietnam priviledged situation attracted some big international players who installed trade points in an atempt to somehow control the market.

Analizing the chart above we may notice that for the last 20 years the international prices and the world production had inverse simetrical path which is absolutely normal.
Unfortunately we do not have figures for the international trade before 1997 ( in green).

Nevertheless 2 things are evident:

1- The trades are always less than production which may be justified by local consumption and carryover stocks. If the green line would be sometime above the blue it would mean that carryovers are consummed and a potential shotage is created, which is not the case in recent years.

2- A big carryover stock was created during the last years, particullary since the year of 2000 when Vietnam begun to strongly improve its production.

Actualy just analizing this chart wouldn´t give any plausible reason for the sudden rise in prices that happened in July 2006 cause all the other parameters continued their path steadily.

India has a huge internal consumption a highly developed trading system and exchange trades. The futures trade
as we commented before are not always used by the real pepper dealers. If you put toghether several factors that may justify a mass cataraze it can explain the creation of an uncotrolable movement towards an objective - in this case the prices rise.


It is evident and legitimate that producers want to get better prices for their work. If this wishfull thinking perceives some other facts that may support it and the response from other parties begin to happen, than it is a snowball and an avalanche - no one can stop it till it gets to the crossroad.
And in this case the crossroad is: Will prices be sustained ?

My hearty congratulations to you...

Dear Michail

My hearty congratulations to you for sharing on your thoughts on black pepper.In fact you have come out with the actual thought of pepper exporters, pepper traders and people who are connected with pepper from india i must say.Actually they are in a situation where they have no role to play where it is controlled by cartels and operators who may have not seen pepper at all.

I an sure that out of india most of the contracts which was done for june,july, august and september shipments are in the range of usd 1600 and usd 1800 pmt cfr ny and Losnageles. May be one or two parcels of usd 1.00/lb may be there but since last two months we being one amongst the first three exporters have not seen any buying interest at all from usa or europe because of the very high prices.
The exporters here are happy in one way,they can still buy farmgate at current levels and export it to the warehouses of public pepper exchanges without any problem realising quick cash flows and dont have to wait for months to get the export freight subsidy from government.
But other producing country exporters they have only one alternative either perform and loose heavily or default.What i would suggest is to approach government of india through IPC and start an international exchange for pepper in india so all concerned in the trade can hedge or play games or whatever they want to.
Take care
Best regards

Better stay away from the market rather than swimming against the tide.

Dear Sir,

There is a basic economic reason for the market to move up.The demand for the second half of the year is exceeding supply.
That is why the market is showing strength.It has moved up faster because there were some smart businessmen who understood the scene and made money out of it.
If sellers can take a bearish call and sell for the crop which is still to come,why cant any one take a bullish call?
Hoarding and selling in advance are part and parcel of our business.Everybody is into business to make money right?
It would be best to stay away from the market rather than swimming against the tide.

Thanks.....
Regds,

Pepper Market on the Edge

After several years of stable market under the Vietnam hegemony all of sudden the placid lake waters turned in to a powerfull tsunami raged vages.
An increase in average prices from 1,300 upt to 2,400 dolars equals to aproximatelly 85% in just 40 days or so.

Who may absorb and how to absorb such turn up ?

First it must be considered that the only public exchanges trading pepper futures are in India. Futures trade was originaly conceived to hedge ( protect) physical trade.
Lately this noble reason has been somehow forgotten and futures trade became a profitable business itself.
Pepper operators in these exchanges are becoming rare players. Big parcel of exchage traders are financial or even common people without any relationship nor knowledge of the physical trade, looking for easy profits and, oftenly, loosing their money in such casinos.

So the actual purpose of this roller-coaster is to keep prices moving up and down in order to realize the spreads. Actually nobody cares about the product itself which is the base for all this entretainment. Read full article...

Indian pepper growers faced with sell or hold dilemma

By K.P. Sethunath
Kochi, Jul. 27 (CRISIL MarketWire) –

To sell or hold is the dilemma facing pepper growers even as Indian pepper is getting too hot for overseas buyers with prices surging ahead rapidly during the past few days, dealers said. Lack of fresh export orders is worrying as India may miss a good opportunity to recapture part of the global market share it lost to Vietnam, they said.
* * *
Sell or hold:
A section of dealers said it would be prudent for sellers to offload part of their stocks to take advantage of the current high prices.
ndia is the only place having enough ready stocks and it should sell part of it before supply from countries like Indonesia reach market, they said.
“India should not hold umbrella for others to jack up price as there is no guarantee that they will not under quote to sell their stuff,” said a dealer.
A concerted move to sell part of the holding is unlikely, as priorities of individual sellers are different, said Ajay Mariwala, a leading exporter.
“It (strategic selling) is a nice idea, but I don’t think it sounds practical,” he said.
Tight supply due to sellers holding stocks will not allow any such concerted action, said Kishore Shamji, another leading exporter.
“Where is the pepper,” was his reply when asked about chances of sellers offloading part of stocks to take advantage of the situation.

Global Supply:
Jakarta-based International Pepper Community has projected a 10-15% fall in global pepper output during 2006 (Jan-Dec) compared with last year.
Adverse climatic conditions, low productivity etc. are some of the reasons cited for fall in output.
This is the major factor triggering the present high prices.
Vietnam the largest supplier to the world is left with little stocks, as they have exported bulk of their output, said Thomas Philip of Cochin Spices.
Indonesia, another major producer is also likely to have lower output this year (2006) compared with last year (2005).
Indonesian crop, expected to be around 15,000 tonnes compared with 22,000 tonnes last year, is also delayed due to adverse weather, he said.
It is expected only in second week or late August, he added.
Brazil, another major pepper producer, is also expected to show lower output this year, he said.
According to IPC, total output in major producing countries, is estimated to be 201,800 tonnes in 2006, down 33,200 tonnes compared with last year.

Prices peaking too early:
Estimates by IPC are pointing towards a tight supply situation leading to bullish phase for pepper, dealers said.
However, most of them feel that domestic prices have peaked too early.
“The situation is appears to be bullish for pepper. But we feel domestic prices peaked little early,” said Jojan Malayil, of Bafna Enterprises.
“We expected prices to scale the current level after getting a clear picture of Indonesian crop,” he said.
However, a section of dealers said there was nothing unusual in prices going up, as it was natural for sellers to take advantage of the anticipated fall in production.
Pepper spot prices in Kochi gained 5.5% Wednesday to 9,500 rupees per 100 kilogram compared with Tuesday while futures also made handsome gains.

VIETNAM PEPPER

Dear Sir
Thanks you very much for your email,
We are very glad to send you the information about the VIETNAM PEPPER as below:
As you know, the weather is not good in this year, so the productivity of this goods had been reduced about 30% comparing with the last year. Otherwise, there are a lot of tree died.
In this time, the market situation of this goods in Vietnam is very serene and scarce, the demand is bigger than supply. Therefore the price is very high.
It is very difficult for us buying this goods from domesict to send you the best quotation now. If this situation will be light in the next days then we will recalculate and send you the best offer.
Once again, thanks you very much for your warm cooperation.
Thanks with best regards,

DIRECTOR : Mr LE VAN ANH
COMPANY NAME: VEGETEXCO I HANOI, VIETNAM

BLACK PEPPER MARKET

Mr Michail Wagapoff ,

Hello Sir , How are you ?
Thanks for your reports on pepper market .
The sudden rise in pepper market in the last 4 weeks the increase is about 40%, price has risen from Rs 70000/ to 95000/ per MT ( 1500 to 2050 USD)unprocessed.

According to me it is not a artificial rise , but a situation which has risen from the REAL GLOBAL SHORTAGE prevailing.
The stock are with the financially strong growers and traders , In India we are of the opinion that a further rise in market upto RS 125000/ per MT (2700 USD) in the coming months.
In VIETNAMS, southeastern region the supporting trees have died affecting the PEPPER CREEPERS , There are news of droughts in VIETNAM.

To what extend are these reports true ?
Will this affect VIETNAMS coming years crop ?

Please let me know your BRAZILIAN PEPPER market.
Thanks and regards.

Mukesh Patel.
Mangaloer. (INDIA)