Kochi 27th February 2010

With dwindling iron stocks in origins coupled with inventories in importing countries at record low levels because of macro economic situations in European Union and North America the overall stock position of Black Gold seems to be a more attractive than Gold for the year 2010 according to experts in Vietnam, Indonesia, Brazil and India.
India who forecasted a 10% increase in crop size for the year 2010 suddenly seeing no flow of fresh crop arrivals in producing centers as well as the terminal markets in Cochin.
Since the crop was a bit delayed we thought it will be available by mid january and now february is over and still no signs of flow seen for the Black Gold.
Pepper cultivation has become unremunerative with farmers not planting any more and not taking care of the existing vines. On top of that the very high wages in Kerala the highest in the country is also keeping farmers away from looking ater the King Spice.

The importing countries are patiently waiting for Vietnam to reduce prices further so that they can comfortably start buying and paying very high spot prices and there, by making the spot market dry in both Usa and European Union. The difference between shipment prices and spot Ny/ Rotterdam/Hamburg prices have widened with holders tightening their belt making buyers nervous.
With shipment possibilities from Vietnam for processed Black pepper very bleak in the month of march in quantities, some of the importers in USA and European Union paid the asking prices of shippers from India although there were stray sellers quoting usd 200 pmt below the current future prices in Ncdex which is already discounted by Rs 5/Kg from the available spot farmgate pepper.
Whether these shippers are bearish or trying to wash monies has to be ascertained .
The export lobby is publishing prices in the media Rs 6 per kg than the actual traded prices for farmgate pepper in Kochin in an attempt to buy cheap from buyers since last 2 months have so far not succeeded other than giving wrong signals to importing countries that indian pepper prices are comparitively cheap with other producing countries making them push down their prices further down.

Every importing country is looking at Vietnam as the cheap source are waiting further to buy low as many importers feel that Vietnam will have to sell as importers are keeping away and the pressure is mounting on them.
On the contrary, one has to seriously think what will happen if Vietnam suddenly stop offering its pepper ?
With record exports from Vietnam in 2009 (135,000 mt ) Brazil (38,000 mt) Indonesia (34,000 mt ) besides India (20,000 mt ) Malayasia (15,000 mt ) and Sri lanka 8000 mt it seems there is no urge for exporters to take sales and create a short position as many feels creating a short position at current levels is not advisable.

The pepper industry should see sustainable development for this year after achieving record high export value for 2009 in the industry's history, Do Ha Nam, chairman of the Viet Nam Pepper Association, said in a press meet in Hanoi.To increase the effectiveness of pepper export activities this year, the association worked with overseas pepper associations to propose information exchanges on output and export markets, Nam said.

The associations should reduce the volume of pepper selling at low prices to avoid losses for pepper producers and exporters, he added.

Exporters should also meet regularly to present a unified front on pepper stock and sales to protect exporters when they were forced to reduce prices by traders.

Vietnamese pepper producers and exporters should improve the effectiveness of processing factories and quality of export pepper, expand export markets, increase consumption of high-quality pepper, boost trade promotion programmes and increase their market share in export markets which include China, Africa and West Asian countries, Nam said.

The association joined hands with international organisations and the Ministry of Agriculture and Rural Development to improve the quality and food safety of pepper products of small producers and traders in Viet Nam this year, he added.

The Agricultural Market Intelligence Cell of the Kerala Agricultural University has advised pepper producers in the state not to get panicky owing to the quick price shifts and market activities during the initial period of the new season, January-March. They should store their produce and wait till April when the market condition improves.

According to the MIC, the traders’ survey indicated conflicting reports on the anticipated output of pepper this season by different sources. This is aimed at influencing the prices.
The anticipated output of Indian pepper this year is reckoned approximately at 50,000 tonnes.

The quick recovery from recession by the European countries and the US should help stimulate export demand, but the exporters and importers are moving cautiously in view of the rupee getting stronger, and the Indian pepper price ruling higher than the price set by other producers.

Trade circles indicated that trade enquiries for Indian pepper are low this season compared to that of the previous year.
Against this background the AMIC carried out a study on the price behaviour of Indian pepper based on the monthly time series data at the Kochi market for ungarbled Malabar pepper for a period of 15 years from 1995 January onwards.
According to the study, the price of Indian pepper is likely to hover around Rs 128-140 a kg during the early season starting from January to March, which synchronises with the maximum market arrivals.
This is a period when the export houses are becoming more active, making strategic moves to maintain their stocks, consistent with foreign enquiries and commitments.
Therefore, the period is likely to witness high degree of speculative activities also

We anticipate a 50% rise in prices this year from current levels in India and we dont care what indonesia Brazil or Vietnam does said one of the largest traders of Black pepper who didnt want to divulge his name . "We have seen huge exports taking place in 2009 amidst global macroeconomic issues and now the worst is over and things started moving reasonably well compared to previous year the oppurtunity for fantastic returns is seen in Black Gold in 2010" he added.

According to Mr Jojan Malayil of Bafna Enterprises the countries largest exporter of Indian Black Pepper "we see a reluctance in the part of farmers to part with their produce and we see many rich people and affluent farmers of other produces have started stocking pepper by selling their rubber and cardamom as a safe deposit sort of thing but i really do not know whether prices will increase by 50% or so this year but i think we are alrerady seeing the bottom and one can start accumulating stocks as an investment and totally ignore the stories appearing in some business dailies".
We have seen speculators becoming very active and going long when prices are close to 150/- kg levels and loosing money and the same way going short when prices hover around Rs 130/- a kg level and again loosing money.

For handsome returns one should be a bit long when prices are around Rs 125/- a kg rather than being short according to analysts in almost all commodity broking companies as they see chances of pepper prices dropping below Rs 117/kg next to impossible and the possibilities of pepper prices hitting Rs 180//- kg is seen very likely on the chart