Pepper prices may rise 39% on low output, hoarding

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A steep fall in production, followed by large-scale hoarding by farmers in a bullish market has upset the local black pepper trade.

According to sources, the price of Asta grade pepper is likely to cross Rs 500 per kg by next month.

 The market on Monday quoted Rs 360 per kg as against Rs 230 last February. The price increased 250 per cent in the last 24 months.

 According to reports, production from Kerala and Karnataka, the two states which contribute more than 80 per cent of the total output, would be low. Production in Kerala would come down by 50 per cent this time, while in Karnataka, it is expected to drop by 40 per cent.

A leading Kochi-based stockist told Business Standard he had so far collected only 27 tonnes of fresh crop against seven-eight tonnes daily in the last harvesting season. Harvesting season in Kerala will end next month. Whatever is being brought to Kochi terminal in Kerala is old stock.

Benny, a farmer from Idukki, a key pepper-producing district of Kerala, said in some parts of the district, production dropped by 60 per cent and the price increase would not benefit the producers since the stock was low.

Last season, Benny said, he had a stock of 1,250 kg; this time it is down to 500 kg.

High wage demand by labourers has forced farmers to withdraw from pepper cultivation and concentrate on less labour-intensive crops like cocoa, he said. According to him, production would drop 50-60 per cent in Idukki.

This season, overall production is expected to be in a range of 20,000-25,000 tonnes against regular output of 45,000 tonnes. The domestic market consumes around 35,000 tonnes of pepper a year.

While market sources expect tight supply throughout the year, experts say prices would touch a new high.

Since India is the most expensive source, there is no effective overseas demand, except local demand from north India. The current Indian price for Asta grade is $ 7,900-8,000 per tonne, which is the highest in the world.

The Indian situation has aided the Vietnamese farmers to quote higher prices.

The price of 500 GL pepper increased to $6350 a tonne, 550 GL to $6,700 and Asta grade increased to $7250.

Since there is normal production in Vietnam, it will get the maximum benefit of the sea change in the world market scenario.

Brazil and Indonesia are giving indications of rising prices as the stocks are low there, too.

In the last season, pepper prices increased fairly well due to low production in Indonesia. Production in that country was below 10,000 tonnes last year against normal production of 20,000 tonnes.

According to leading exporters, the situation is repeating in India this time, making the global market fairly bullish for the full year.

Source: http://www.business-standard.com/india/news/pepper-prices-may-rise-39low-output-hoarding/466046/

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