Pepper prices fall with sluggish demand

KOLKATA - Active selling by Indonesia coupled by the sluggish demand in the United States and Europe due to their continuing economic slowdown have led to a global decline of the prices of pepper.

The Indian market has taken a dip in the last few days due to profit booking, but traders maintain that the market has been affected negatively by the global trend.

Jojan Malayil of Kochi-based Bafna Enterprises, said, " Indonesians are selling very actively and reports say that their crop is more than 50,000 tons. This could have selling pressure on Malaysia and Brazil and lead to a weak market."

"Vietnam has 50,000-60,000 tons of pepper. It is mostly in the hands of farmers who are reluctant to sell as they are cash rich from the sale of other commodities like coffee. The market would depend on their strategy," Malayil added.

According to Malayil, the demand for pepper in the world market is on the downtrend due to continuing global economic slowdown. " The US consumption of pepper is lower by 22 to 24 percent for the year while European consumption is down by 40 percent," he added.

Buyers and sellers are reluctant to trade in the current scenario where currencies of most countries are volatile and reports of default by buyers continue to come from the West Asian market.

Faiyaz Hudani of Kotak Commodity Services also feels that the global market is weak due to selling pressure from Indonesia and Malaysia."Indonesia is quoting very low rates putting pressure on other sellers. The market would remain weak due to a strong supply and lower global demand," he said.

However, he is bullish on the Indian market due to lower supply and robust demand. Malayil also believes that the Indian market has been hobbled by too much speculations.

K. Satheesh Babu of Agricultural Market Intelligence Center (AMIC) of Kerala Agricultural University feels that the Indonesian pepper production has been overstated.

"Indonesia has the same tropical climate as India and other countries. Climatic changes affect these nations similarly and they are also bound to have the ill effects of erratic climate," he said.

Babu is bullish on the Indian marker irrespective of export demand. "Festival and winter demand from North India will keep the market firm. Indian supply is limited and the market will surge," he said.

He feels that the global market would stabilize as the United States and Europe starts buying for the December celebrations and holidays, starting from September. According to the reports of International Pepper Community's (IPC), Indian production is projected to decline by 5,000 tons to 43,000 tons in 2012.

The country will import an estimated 14,000 tons of the commodity but at the same time export some 21,000 tons. India remains as the world's largest consumer of pepper with domestic consumption estimated at 40,000 tons a year.