Weekly update (week 44/2016)
Last week the black and white pepper prices from Vietnam nose-dived. Prices came down with more than 500 USD per Mt in just a couple of trading days. Limited buying activity was reported. Prices have dropped below the previous bottom price which got placed in March 2016 at the time of the peak arrivals. The fall seem to have stabilised for the moment. We hear reports about Chinese buyers which are cautiously re-entering the market at the beginning of this week. This might give some kind of strength to the market.
Balance quantities in Vietnam are reported to be thin.
Lampung is competing with Vietnam for fresh orders. There is only one shipper actively looking for outlets. Others seem to be sold out. Muntok white pepper exporters are less aggressive this week. The Indonesian white pepper prices are in line with Vietnam origin.
Brazil farmers are reluctant in lowering their selling ideas to the exporters. Prices are slowly coming off but available quantities are limited. Brazil is preferred by the European importers because of the lower levels of pesticides found in this origin.
Supply & demand
The sentiment in pepper remains bearish. Prices have dropped with some 30% from August 2016 onwards on fear of record high production in 2017. The actual supply situation in 2016 is hardly better than in 2015. Against record high exports from Vietnam there are disappointing crop sizes in among others India, Sri Lanka and certain pockets in Brazil.
It’s too early to forecast the crop size in Vietnam for 2017. The general assumption is that the crop will grow because of a larger acreage of pepper coming into production. The last couple of years farmers have planted a lot of new pepper vines. At the moment we hear stories about adverse weather circumstances. It is too wet in Vietnam which might cause root rot. India and Brazil (Espirito Santo) are complaining about too dry weather.
We are of the opinion that a large percentage of the bad news for farmers (possible oversupply in 2017) is already priced in today’s market. There are chances of supply interruptions prior to new crop arrivals in Vietnam in December/January . Discounted offers from reputable shippers / trading houses might be considered.
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