Bullish global prices may slow pepper imports and stimulate exports, say growers

Global black pepper prices are spiking due to decreased production caused by unfavorable weather and farmers switching to other cash crops CALL.

The prevailing bullish trend in global pepper prices will likely provide some relief to the Indian growers. The increase in global price, growers said, has brought parity between the domestic prices and the landed cost of the imported pepper, especially from countries such as Vietnam.

This parity is likely lead to slowdown in imports of pepper into the country, amidst expectations of a higher domestic crop that’s currently being harvested.

“International prices have moved up by around from around $3,3004,400 per tonne over the past one year. As a result, the landed cost of imported pepper from Vietnam with customs duty of around 46 per cent and the domestic price is almost the same. For the first time, we are at parity with the international prices and this may lead to a slowdown in imports,” said Pradeep Pooviah, Technical Committee member of the Consortium of Pepper Growers Association, a group of 14 growers’ bodies in South India.

PRICES ON THE BOIL

Indian pepper growers have been protected by a minimum import price (MIP) of ₹500 per kg levied since early 2018 from cheaper imports. Pooviah said the prevailing domestic prices are around ₹515520 per kg and the landed cost of pepper from Vietnam will be around ₹550. It will not be competitive to import for the domestic market, Pooviah said. On the other hand, if the prevailing price trend continues, India may be able to export some quantity of pepper as the harvest is seen to be higher than last year, Pooviah added. Globally, black pepper prices are on the boil mainly because of the decline in production due to factors such as unfavourable climatic conditions and shift of farmers from pepper production to other cash crops.

Because of the dry spell in many production countries, the prices are likely to move up further, says Kishore Shamji, Director of Indian Pepper and Spices Traders Association (IPSTA).

Indian black pepper, which is superior to its quality, is in a better position visavis products of other countries, fetching a price of $6,500 per tonne. Sri Lankan pepper is ruling at the same level, while Vietnam is at $4,700 for ASTA quality and $4,500 for 550 GL and Brazil at $4,200.

At a time when the harvest is on in many countries, there is anticipation of more import arrivals into the domestic market, he said.

The contract is likely to extend the downswing further, possibly to ₹170, before making a Uturn. After softening to ₹170, we expect lead futures to establish a rally.

The contract can move up to retest ₹183, where the 50day moving average coincides now.

Note that the price region between ₹166 and ₹170 is crucial support.

This base has held true since June 2021. But a breach of this can turn the mediumterm trend bearish.

The nearest notable support levels below ₹166 are at ₹158 and ₹150.

TRADE STRATEGY

Stay on the fence. Go long on lead futures if it moderates to ₹172. Add more longs at ₹170. Place stoploss at ₹165.

When the contract rallies past ₹180, raise the stoploss to ₹175. Liquidate the longs at ₹183.