Faced with competition from India following the volatility in the Futures market here, global giants in pepper production - Indonesia, Vietnam and Brazil - have formed a group to protect their interests.
The root cause of forming the group was to control the global pepper market as high volatility in Indian Futures over the last three-four months has upset their interest.
The trio together controls 65-70 per cent of the world's pepper production. Representatives of Indonesian Pepper Association, Brazilian Pepper Exporters Association and Vietnam Pepper Association will meet in Indonesia between June 25 and 28 to discuss joint marketing strategies and plantation surveys.
This consortium has been active for a couple of months as India had been slashing prices of the ASTA grade pepper considerably.
According to market analysts, India now has the lowest price tag across the globe and it has been affecting exports from these three nations, especially Vietnam. In the last fortnight alone, India has sold 1,000 tonnes of pepper to Europe, USA and Canada in the range of $3650-3725 a tonne.
Vietnam has been quoting $3850, while Indonesia quotes $3900 and Brazil's indication prices are $3700 for B1 and $3800-3850 for BASTA. Malaysia quotes the highest tag of $4200 in the current international market. Traders said Vietnam is still quoting higher tags because of the drop in global and domestic production of pepper.
Compared with 2006, production would drop 25-30 per cent resulting in various countries quoting much higher tags than that of 2006.
During January-April 2007, exports from Vietnam had dropped by 32 per cent compared with the year-ago period. According to exporters in India, Vietnam's total stock would be around 45,000 tonnes.
The world requires 20,000-25,000 tonnes of pepper on a monthly average. And with estimates of lower production in the next season, Vietnam's stock would be much lower than previous years. Even after reducing the price for ASTA to $3850 from $4000-4100, it could not garner substantial global demand. The major importers have adopted a wait-and-watch strategy, hitting exports of major producing nations.
Malaysia's April exports had dropped to 836 tonnes from 960 tonnes in April 2006. Exports in January-April had dropped by 16 per cent to 3649 tonnes.