Pepper set for a breather after bull run.

MUMBAI: Indian pepper, up nearly 40 percent since January, has been priced out of the export market while domestic demand stays weak, through industry officials pin some hopes on a festival fillip from later this month. Vietnam, Brazil and Indonesia are major overseas competitors and Indian prices are 10-12 percent higher than them, industry officials said.

In Kochi, a major trading hub in Kerala, spot prices have risen nearly 37 percent since the beginning of the calendar year on lower stocks, National Commodity and Derivatives Exchange data (NCDEX) showed. "The bull run is over now. Overseas demand has come down significantly as other countries are offering much cheaper," said Jojan Malayil, CEO, Bafna Enterprises, a Kochi exporter.

"Prices may fall to 178-180 rupees per kg in coming months as India has negligible chance of a comeback on the export front again." In India, the third largest pepper producer in the world after Vietnam and Indonesia, the crop sown in May-June is harvested from December to February. "Indonesia is quoting lower as it is the arrival season there. August contract may fall by 700-800 rupees from the current levels of 19,100-19,200 rupees per 100 kg," said Nalini Rao, analyst with Angel Commodities, predicting the fallout on dervatives trade.

Nearly stagnant output in the last 3 years has seen imports climb and exports decline. In 2009-10 India's estimated pepper imports jumped 63 percent to 17,500 tonnes, while exports fell 22 percent to 19,750 tonnes. India's pepper exports fell 5 percent to 4,650 tonnes in April-June 2010 from the same period a year ago.

Kerala is India's leading pepper-producing state, contributing around 96 percent of total output, followed by Karnataka.

FESTIVE FILLIP

Despite bracing for a slackening, the festive season begining later this month and extending till October, is likely to boost domestic demand.

"A bounceback is likely after some correction in the market on local demand amid a squeeze in supplies," said Manikant Khona, a tarder from Kochi. India's pepper output in 2010 is expected around last year's levels, a Reuters poll of eight traders, exporters and analysts showed in January Rainfall in Kerala was 37 percent more than normal in the week ended August 4, helping proper growth of pepper vines in the state, India's biggest producer.

Source : economictimes.indiatimes.com