Indonesia

Dear Editor,
30/07
Indonesia which until three weeks ago, has been offering black pepper at usd 4500- 4600 a tonne, has suddenly turned out to be the cheapest source of this spice in the world. Thanks to the recent melt-down in its domestic prices, which happened as the wotlds largest oprerator of Black pepper who was buying the farmgrade pepper also competing local exporters withdrew from the market and indeed has become an agressive seller. The harvest is coming to an end contrary to the news of Indian media that the crops in Indonesia is delayed commented one of the top domestic exporter.Though the price crash comes as a boon to exporters, they are, however, cautious about responding to any new contracts for string shipments till the end of the year and are more comfortable in working for nearby shipments and offers are made at usd 4200-4225 pmt cfc 1.5 Ny . It is estimated by the agricultural department that nearly 25,000 tonnes of black pepper would be harvested in the current year although a section feels the crop is only 15000 mt and another section feels the crop is 35000 mt.

The Indian Black Pepper Futures is dominated by bull operators who have made the prices to usd 4650 pmt fob cochin for the Indian variety Mg-1 asta grade making it the worlds most expensive pepper which was well in line with other producing origins till four weeks ago.Thanks to the huge demand by the domestic operators after the prices crossing above Rs 200 per kg in the producing states kerala and karnataka .You can buy Black pepper much cheaper than what it is quoted in Cochin said an exporter.

Though Indian pepper in value-added forms has great demand in the world market, exporters of such products are sourcing their requirements from Indonesia since last ten days as the landed cost of this pepper in Kochi is only Rs 190/-kg and the neighbouring island nations pepper landed cost in kochi is only Rs 185/-per kg., said a Kochi-based exporter. Attracted by lower price, Indian processors have booked about 500-650 tonnes of pepper from Indonesia in the last week. This has surprised the bull operators as some exporters who were heavily long in the indian exchanges physical stocks are likely to deliver it back to the fellow citizens as they have got replacement Rs 25/kg below indian Black pepper for their value addition. With declining demand for the spice from abroad, and increasing prices domestically India has become a net importer of the spice in the first quarter of this financial year according to the statsistics made available by the Cochin Chamber of commerce and industry.
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INDIAN PEPPER FUTURES LIKELY TO DROP ANOTHER RS15 PER KG IN TANDEM WITH INTERNATIONAL PEPPER PRICES

The Indian Pepper prices which is currently ruling highest in the world because of its huge domestic consumption is likely to drop heavily from the second week of August according to the indications we receive from overseas markets. The neighbouring island nation whose new crop is ready has become agressive and offering its 525 g/l variety cnf cochin for august shipment at usd 3.950 pkg (Rs 185.49 per kg ) without finding buyers and same is the case with Indonesian new crop which is offered in all directions and from all shippers and resellers at usd 4.30 per kg cfc 1.5 (Rs 201.9 Per kg )New york delivered. Brazil very quitely accepting some deals for august/sept shipments on special payment terms by farmers /exporters who require cash at usd 4.20 per kg. Indian mg1 asta prices are currently the most expensive pepper quoted cfc 1.5 ny at usd 4.850 per kg cfc 1.5 Ny ( Rs 227.73 per kg ) With indian pepper futures dropping almost Rs 200 per ton from last weeks high the hunger for pepper has subsided from north indian speculative traders and they have become sellers to book their lossess in the main northern indian markets Delhi and jaipur. I do not think the current higher prices can sustain for long if no export demands coming to the country and since exporters have physical stocks which are already hedged in the exchange platform might become physical deliveries if the expected overseas demand does not show up; and this scenario will make available more stocks in the system and markets can drop substantially from current levels and move down to 190-192 per kg for nearby August deliveries according to expert analysts in the national commodity exchanges.

Global Pepper availability seen in Deep Red although Production/Demand Mismatch Minimal

Guestimates of International Pepper community put production at 310000 mt of both Black and white pepper for the year 2010 but where as realistically according to the agronomists of leading spice companies in the world the production was some where in the area of minimum 360000 mt against a requirement of 216000 mt by importing countries and home consumption from origin countries to the tune of 90000 mt. Basically there was no mismatch between demand vs supply figures but what went wrong was the miscalculations in assessing availability of the spice when demand was there. Even today many importers feel that asian economy is not faring well and farming community will have to sell their produce when the harvest comes and they could do nothing but to sell, but in reality the farming community has become so rich and they have no rush to sell and the best example was seen when the new crop in india came this year when the farmers decided not to sell it as they felt the current year they will see Rs 200/kg for sure which they have been anticipating for the last two years and decided to hold back.The Value added industry went in for record imports in the first half of the year so that it will keep them going till October as they are not supposed to keep the imported pepper in the country for not more than 120 days. But many has exhausted their stocks and imports totally become unviable and the pressure on indian stocks mounting with many grinders putting on their hands on the exchange stocks which can make things more worse if the sellers do not honour their commitments by not giving physical deliveries.
Vietnam the worlds largest producer and exporter has put 85000 mt across seven seas of the world, and according to VIetnasm Pepper Association the balance available from that country is only 5000 mt according to the production estimates of 90000 mt they furnished with International pepper community (IPC) But the actual production figures according to trusted agronomists who were putting the figures very correctly since 2002 the production of pepper in the country is in the ranger of AROUND 120000 - 125000mt and carry over stocks of 10000 mt and imports of 5000 mt which will make a smooth sailing to 2011 was what the importing countries thought and what happened today is literal hoarding of the commodity by the worlds largest producer and exporter of the spice to the surprise of many importing countries.
Indonesia who were ruling the Black ASTA grade pepper Biz for quite sometime now , thought that they can do it for one more year and were undercutting Vietnam and Indian ASTA pepper prices by usd 200 pmt for no reason are now caught at the wrong foot with the worlds largest pepper importer and pepper trader very active in Panjang buying directly the aslan( farmgate) grade there by making the life of major exporters difficult and quite unhappy.
Malayasia sevicing their traditional markets Japan, Korea and Taiwan with their small crop has also been importing quite a bit from Vietnam in the first half of the year to avoid supply crunch in their local market.Their prices have been totally out of line for the rest of the world other than Japan, Korea and Taiwan who predominetly using sarawak pepper and they didnt want to change the flavour profile for a few hundred dollars.
India the origin which consumes almost 75% of its production internally for home consumption and the land where they have legalised online Casino by the name National Agri Commodity ExchangesNational multi commodity exchanges was the leader in bringng up prices from usd 2850 pmt fob for asta grade in March to the current usd 4150 pmt fob levels has been behaving pretty decent this week even when Vietnam increased its prices to usd 4650 fob levels hcmc for the asta grade and 500 grams/litre prices to usd 4050 pmt fob levels and Indonesia raising their prices from usd 3700 fob panjang levels to 4100 pmt fob panjang levels on friday and Brazil moving up as high as usd 4200 fob Belem levels with buyers paying up even high as usd 4050- 4100 fob belem for august/september shipments.
The USA market which is the worlds largest single importer has been in a total denail mood has finally showed their faces on Friday and picked up all cheap priced offers from all origins and resellers as they have realised that the situation is getting worse and it will be much worse in the coming weeks and better late than never as the next big crop is seven months away and the origins will continue to squeeze as most of the pepper is still with farmers and not intermediaries.
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