Vietnam's loss is turning out to be India's gain as far as pepper market is concerned.

After El Nino and droughts hit pepper in Vietnam, causing a production drop of around 20%, Indian market is hoping that the global supply position will remain tight this year.

The Indian market, which has been swaying both ways with no strong fundamentals, is hopeful of remaining steady since the Vietnam Pepper Association has officially said that besides El Nino and droughts and pest infestation, improper cultivation of pepper plants and overuse of fertilisers were taking a heavy toll on the output.

Last year Vietnam earned a record $195 million, exporting 1.18 lakh tonne.

Officials said the Vietnamese crop was yet to enter the global market and indications were that traders there were holding onto the crop.

Vietnamese variety was quoting at $2,350 a tonne when the superior MG1 variety was quoting at $2,825, Indonesia $2,850 and Brazil $2,700.

Meanwhile, there was pressure building on extending the export subsidy scheme so that India remained competitive in global market which was dominated by Vietnam till now. Another threat is Sri Lanka. Sources also fear flow of lower quality Lankan pepper into India from April.

The export subsidy policy of India had helped the country outweigh Vietnam to emerge as the largest exporter of black pepper to the US in January.

Major export houses were able to ship the commodity in large quantities between November 2006 and January 2007, with the subsidy bringing about a level playing field in the domestic and the global prices of black pepper.

Of the total US imports of 4,226 tonne in January, India shipped 1,870 tonne, followed by 1,225 tonne from Brazil, 465 tonne from Indonesia, 375 tonne from Vietnam and 115 tonne from Malaysia.

Vietnam, Brazil and Indonesia dominated the US market for the last five years, with India at the bottom of the list.

Between January 2006 and January 2007, the total US imports jumped to 59,724 tonne, almost equal to the average annual production of India. In the previous period, the US imports accounted for 56,760 tonne.

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