Pepper prices flare as output douses 40%

Growers begin to hold back stock

With a fall in output and a rising price, pepper farmers in the south have started holding back their stock, expecting the shortage to worsen and fetch them much more return.

The price at the wholesale market here — the biggest in India and the main export centre — is Rs 670-680 a kg for garbled (cleaned) pepper, a rise of 20 per cent in two weeks; Rs 700 a kg is expected this week itself and  up to Rs 1,000 by June-July. Pepper is harvested in India from the beginning of December till end-March and output (Karnataka and Kerala account for 90 per cent of India’s production) is estimated in the current season to have dropped about 40 per cent, the biggest fall in 10 years. Kishore Shyamji, a leading exporter, estimates total production at 35,000 tonnes; it is normally 50,000-60,000 tonnes.

So much so, says Shyamji, that March saw Indian imports from Vietnam (which produces 40 per cent of the world’s pepper; India normally accounts for 20-25 per cent) of 1,600 tonnes to meet demand. Growers  told Business Standard that traders from Tamil Nadu are now buying at Rs 650-700/kg directly from the plantations, substantially impacting supply to major terminal markets, such as this one.

Cross-border trade is very active, one is told, as there is no  value added tax on this in Tamil Nadu,  while Kerala levies five per cent VAT. North Indian traders are active in Karnataka  and ready to buy at Rs 600-650/kg.

To add to the supply shortage, there is also a drop in Vietnam’s output; this is normally 150,000 tonnes but the current season is unlikely to see it exceed 125,000 tonnes. So, the global market is also poised for a further increase in prices. As  India quotes the highest price across the world, export demand is miniscule here. Vietnam offers  the ASTA grade at $8,500/tonne; the Indian price is $12,000 a tonne.

Short supply in global market

Drop in production in major producing countries like Vietnam makes the global market hot. Earlier estimates indicated 150,000 tones production in Vietnam, but as per the latest estimates the outcome  would confine to 125,000 tones. So the global market is also poised for further increase in prices as demand is too high. Cross border trade between China and Vietnam upset global supply to an extend. As India quotes the highest price across the world, export demand is very low in India. Vietnam now offers  ASTA grade pepper at $8500/tonne, while the Indian price is $12,000. So India is absolutely out of the global trade, said leading exporters.