The Hindu Business Line : Pepper to rule firm on tight supply

Hot prices
IPC prices index for black pepper increased sharply in July, August and Sept
Production from almost all sources is estimated to be lower

Kochi , Oct. 12

If the dramatic increase in pepper prices during July - September this year after the stagnancy at lower levels for the past over four years is any indication, the prices are expected to rule firm given the prevailing tight supply position in the world market during the rest of the year.

Besides, such a positive trend is likely to prevail even in 2007 as the tight supply position might continue next year also, according to International Pepper Community (IPC) sources on Thursday.

Black pepper

The IPC prices index for black pepper increased sharply by 11.2 points in July, 19.2 points in August and 30.5 points in September 2006. The prices index for white pepper increased by 10.7 points in July, 21.3 points in August and 16.7 points in September 2006.

The market for black pepper was volatile, after it became clear that supply at origins was limited and stock in the pipeline was tight, they said. Production from almost all sources was estimated to be lower. In 2006, total production of black pepper declined by 17 per cent to 2,20,000 tonnes, from 2,65,000 tonnes during 2005.

Crop estimates

The country's crop is reported to have decreased by 29 per cent, although export from Kochi during January - August 2006 has increased by 23 per cent. Vietnam has sold most of its stock from a reported lower crop this year. Indonesia's crop in August, which was expected to compensate the limited stock at other sources, only comes to 75 per cent of the previous year's crop.

The market is focusing on the development of the pepper crop in Brazil, which is also reported to be lower. Under these conditions, stocks are expected to continue to be limited and price is likely to remain relatively firm till the end of the year, they said.

Indian scenario

During the last three months, the market for black pepper in India has been active. Trading at commodity exchanges increased significantly.

At Kochi, the average spot price of un-garbled black pepper increased from Rs 65.33 per kg in June to Rs 78.90 in July. The price rose further to Rs 97.78 in August and Rs 120.44 in September. In the fourth week of September, however, a price correction took place as buyers took cautious positions to see market developments in Brazil.

The export of pepper from India during January - August was 13,710 tonnes, against 11,130 tonnes during the same period last year. Considering the reportedly lower crop and increased exports this year, stocks available in the domestic market are likely to be tight.

Global markets

Vietnam reportedly has sold more than one lakh tonnes of pepper during January - September 2006. Official sources reported that Vietnam had shipped 79,000 tonnes of pepper (excluding cross border trade with China) during January - July this year, of which 88 per cent was black pepper. Production of pepper in Vietnam during 2006 is reported to be only 92,000 tonnes (77,000 tonnes of black and 15,000 tonnes of white). Considering the above situation and small carry over from 2005, Vietnam will be facing a tight stock position till next crop to be harvested in February 2007, they said.

In Sarawak, in addition to the slightly lower production of pepper this year, improved earnings from rubber have given farmers greater capacity to hold pepper. They are not interested to release pepper on anticipation of higher prices. This situation has resulted in a slow market with price moving steadily upwards. During July, the average local price of pepper in Kuching was MR 6.07 a kg, up from MR 4.95 in June. The price continued to move up to MR 6.75 in August and MR 8.05 in September. F.o.b. prices increased from $1,815 a tonne in June to $2,174 in July, $2,406 in August and $2,922 in September.

The pepper harvest in Lampung has been completed and the output is estimated to be only 75 per cent of previous year's crop. Good demand during the harvesting season has absorbed pepper quickly from the farm level. Farmers have not been able to benefit much from the recent price increases, as available material was limited. During September 2006, average price at farm level in Lampung was IDR 23,500 a kg, up from IDR 17,500 in August and IDR 11,650 in July 2006.

Brazil's crop for 2006 is now being harvested. Due to limited stock at other origins, the crop has drawn buyers' attention, not only as a source of supply but also for price indications, IPC said. It is reported that a price correction took place at the end of September. It is expected that this situation is only temporary since this year's crop output is reported lower than previous year. During January - August 2006, total exports from Brazil amounted to 17,836 tonnes, up by 13 per cent from 15,797 tonnes during the same period last year, indicating that much of last year's carryover stocks may have been depleted.

White Pepper

There has been a steep rise in the prices of white pepper prices also during July - August last in Indonesia. In Bangka, prices improved significantly. Although the harvesting season took place in July-August, activity was limited as farmers were not interested to sell, given the poor output this year. Returns from other sources such as tin, rubber and palm oil also strengthened their capacity to hold their pepper, expecting further increase in prices.

More Stories on : Spices & Condiments | Outlook

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
SLBC to write off 205 Kerala farmers' loans

Outlook on N-E monsoon onset maintained

Rubber recovers on global trend

Govt mulls sops for new coir looms

Pepper to rule firm on tight supply

Cardamom improves

Pepper futures move up