KOCHI (Sreekumar Raghavan, Commodity Online):In agriculture, crop information is vital for farmers to decide on sowing and planning future investments. It is also vital for traders to decide on stocking and selling. But atleast in the case of spices, that is what is precisely lacking. The recent volatility in pepper futures prices can be attributed to lack of sufficient information on crop situation in Vietnam, world's leading producer and exporter of the commodity apart from Brazil and Indonesia.

One look at several news reports that have appeared in recent times shows how the media itself is at a loss to support their observations with reliabe data on global production, imports and exports. While attending a leading global spices meet in Goa last year and interacting with industry stake holders in spices, I learnt that much of the figures or data attributed to Brazil, Indonesia, Malaysia and Vietnam on pepper could be misleading.

While there is clarity on global production and exports of food grains, oilseeds, rice and some cash commodities such as crude oil, rubber and coffee, what is woefully lacking is reliable market information in the case of spices.

Recent reports cites the lower prices of Brazil origins as cause for downtrend in pepper prices. But a Bloomberg report of September 2 quoting a 92-year old US brokerage, AA Sayia & Co reported that black pepper prices may jump as much as 12% on rebound in the global economy towards end of this year. It also quoted Vietnam Pepper Association official and sated that floods in Brazil may curb yields and crop in Vietnam may not be enough to meet increased demand.



Now see a Vietnam Chamber of Industry and Commerce Report updated on November 17th 2009: "Vietnam has become the world's leading black pepper exporter, shipping around 100,000 tonnes of the products while earning US$134 million last year. The export volume was three times higher than that in 2000, however, earnings decreased by nearly US$12,000.

According to the International Pepper Council (IPC), since 2002, pepper supply has exceeded demand in the world market. In 2004 only, total world’s pepper output reached up around 321,000 tonnes, plus 60,000 tonnes of stockpiled volumes, bringing the total supply of the product to 380,000 tonnes. Meanwhile, the world’s total demand for the agricultural product stood at only 200,000 tonnes last year.

IPC warned that if their member countries continue to expand areas of cultivating pepper, the sector would fall into a pepper-redundant crisis, which had previously happened to the coffee industry."

The Bloomberg report contradicts the Vietnam trade body's news report quoting International Pepper Council .And the latter report suggests a glut in pepper which could be the reason Brazil, Indonesian and Vietnam origins are quoting lower now. Another news report blamed Indonesia aggressive pricing strategy for Lampong ASTA Pepper for Nov/Dec/Jan shipments at US $1.45 per pound which was lowest across all important markets other than Brazil thus turning away buyers from US temporarily from the market.

India produces around 50,000 tonnes of Black Pepper which is sufficient for local consumption but imports pepper for re-exporting to other countries and global availability of pepper till January is quoted at 45,000 tonnes by news agencies. This coupled with 15,000 tonnes of carry over stock is just sufficient to meet consumption demand world wide. Some analysts stated that majority of the present stock would be over by December and by January prices are set to surge. However, with no clues about new harvests coming in January, the analysis looks suspect.

The moot question is how much of this information is reliable and are markets being swayed by misinformation.The International Pepper Community which has representatives from leading pepper producing countries need to gear up their resources and help transmit reliable information on pepper to the global community as several investors or traders not connected with spices could be trading on futures exchanges based on insufficient market information or outright misinformation. In the absence of reliable market data it goes without saying that market would be left to the whims and fancies of speculators.

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