Vietnam will dictate Prices for pepper in 2010

Vietnam the worlds largest producer and exporter of Pepper who created history in 2009 by exporting 135,000 mt Pepper ( both Black and White ) there by showing to the world that there are takers for that much quantity of pepper from one single origin despite heavy exports by Indonesia (34000 mt ) Brazil (38000 mt ) followed by India, Malayasia and Sri lanka will decide the prices for pepper in the 2nd, 3rd and 4th quarter of 2010 with the iron stocks in Indonesia and india dwindling to record low of the century and stocks in importing countries also at recent low levels of the decade.

People are settling back in their offices in Hochiminh and workers are back in the fields and harvesting has begun in full swing in Vietnam after Chinese New Year but interestingly like India, the farmers in Vietnam who have become quite rich with decent prices for their produce in the last 3 years are in no rush to sell and resort to watch and wait attitude which is same of the buyers.

Who will blink first has to be seen.

Western world has not realised that farming community have become much stronger financially than them in all ways and they are no longer at the mercy of buyers and unlike in the past there is no need to sell 30-40% of their crop to pay wages, fertilisers and pesticides.
They are also aware of the situations prevailing in other producing countries and have fully realised that they if they dont ship atleast 10,000 mt of pepper a month the entire world will run out of pepper.

The entire importing countries are waiting for the pressure to build up in Vietnam which according to seasoned veterans might happen in end March or early April so they can jump in and start buying. Some of the vietnamese companies have already short sold and some are again trying to do it in anticipation of prices going lower but importing countries are staying back as much as they can as currrently they can buy sterilised black pepper from India by paying a small premium and natural from both Indonesia where one seller is very active and even willing to compete with Vietnam prices on ASTA and one has to see how long this will continue.

Indian Comexes have just 2700 mt of valid physical stock spread over 6 contracts from march to August and just 216 mt so called mg-1 is loosing validity in the month of March contract which is maturing with just 14 working days the longs can very well squeeze the shorts but currently the longs are giving a long rope to play while amassing huge long positions which can even bring the exchange to a standstill with serious defaults according to our sources in the industry.

The Vietnamese traders spend more time looking at the trading screen of Indian comexes and they follow even minute changes and are well aware of all the developments in India who still have a say in the international market although it has become a importing country rather than a predominent exporter.

Someone is vehemetly trying to push down the future delivery prices by continously selling nearmonth March and April deliveries much below the available spot farmgate pepper with the blessings of defunct regional exchange who still publish the spot pepper prices of indian pepper.

Although propagated as the most farmer loved organisation themselves currently they are the biggest enemy of the farmers and promoters of tax evaders alleged trade sources. It seems no one is bothered as it is helping the export lobby as a whole in building up a strong long position in a country where harvesting is going to be over in one of the areas where more than 50% crop is cultivated with hardly 1000 mt new crop coming for sale although it is reported truck loads are shipped out from both Idukki and Wyanad besides Pathanmthitta to neighbouring state Tamil Nadu by evading taxes by experts sitting with magnified glasses specialised in other peoples business.

Brazil is very quite with all attention focussed on Vietnam and prices from there is comparitively higher on faq grades of 500 grams/liter and 550 grams/liter and since their new crop is faraway and with record exports done in 2009 they also are not in a hurry for further sales.

Malay crop is coming in end April and early May and is expected to be in the same range of 2009 and since they have their own traditional markets to sell at a premium they also are not posing any threat to Vietnam.

With sales done for 25000- 30000 mt from Vietnam in the next 10-12 weeks the pressure from Vietnam will vanish and they will decide the pricing of Black Pepper in 2010 and they hold the Key.

Sham Nair