Black pepper prices to rise on low output

Black pepper prices may rise this year due to an estimated decline in the global production of the commodity. Anticipating low supply in the pepper mart, the Asta grade variety was on Monday quoted at $5,600 a tonne compared with $5,500 a tonne yesterday.

There may be a shortfall of 33,000-35,000 tonnes as global production of the spice is pegged at 257,000 tonnes for this year. Last year total production was 290,700 tonnes.

A sharp decline is projected in countries like India, Indonesia, China and Brazil while production will be static in Vietnam, Malaysia and Sri Lanka. The position of Indonesia would be more critical as this year its production is likely to be 10,000 tonnes due to adverse climatic condition.

In 2010, their production was 30,000 tonnes and had a carryover stock of 15,000 tonnes, aggregating a total supply of around 45,000 tonnes. But, for the next crop season, scheduled for this July, the total output might be 10,000 tonnes and their carryover stock is negligible. Due to aggressive selling last season, almost cent per cent of their stock was sold.

Similarly, in India production will drop to 40,000 tonnes from the usual 55,000 tonnes.

In Kerala, output was poor and the harvesting season is nearing to an end. Now, crop from Karnataka is coming to the terminal market in good quantities and the total size from there is estimated at 25,000 tonnes. So the global supply from India will be poor this year as the country needs more than 40,000 tonnes for its domestic consumption.

In Brazil and China, output may decline 10,000 tonnes and total production this year might be 30,000 tonnes each from these two countries.

A total 110,000 tonnes production is estimated in Vietnam, the largest supplier of the spice, Malaysia will have a normal crop of 15,000 tonnes and production in Sri Lanka will be 12,000 tonnes. The aggregate production of other small producing countries is pegged at 10,000 tonnes, taking the total global production to be 255,000 -260,000 tonnes this year. There may be a carryover stock of 40,000 tonnes only.

The only major supplier which will have normal crop size is Vietnam, so the global pepper mart will depend more on Vietnam in order to meet the demand. Interestingly, global demand is on an increase as the US, West Asia and Europe buy more pepper. Local demand in countries like India is also on the increase. In 2010, total consumption was 320,000 tonnes and this may increase five per cent this year. So, a weak supply will add more pressure on the price line this year.

According to experts, July onwards, global market will have to depend more on supply from Brazil and Indonesia and if their supply is weak, the prices might shoot up. to $6500 a tonne in the second half of the current year.

In view of these market conditions, Vietnam is not so aggressive in selling the fresh crop and they adopted a more controlled selling strategy this time. Also, rain affected the harvesting and processing during the last couple of weeks.