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.
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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.