Pepper prices likely to remain high in 2011

The tight supply condition in the global pepper market is not likely to ease for the next seven-eight weeks, as stocks in major producing countries like Vietnam, India and Indonesia are declining sharply.

Supply is expected to improve only by mid-February, when harvesting in Vietnam will be active. Market participants remain bullish on pepper for the entire 2011, as production in the next season may fall due to a sharp deviation in the climatic condition.

Exporters, dealers and growers say prices will surpass the earlier record of Rs 27,000 a quintal (which happened a decade back) in 2011, with some of them expecting a level of Rs 30,000.

Vietnam and Indonesia, the two leading pepper suppliers, have already sold out their stock. Hence, they are now quoting much higher price tags. At present, Vietnam is selling the ASTA grade for $5,400 a tonne, while the 500 gm/litre grade is being quoted at $4,750.

Interestingly, Vietnam has already imported around 15,000 tonnes of pepper till November this year, which indicates that stocks have exhausted there. A bumper crop in Vietnam can only ease prices in the new year. According to estimates, Vietnam will produce 95,000-100,000 tonnes of crop this time, down by around 10,000 tonnes. Conservative estimates indicate a much lower production of 82,000 tonnes due to unfavourable climate.

Spices Board projects Indian production at 48,000 tonnes, but growers estimate a maximum output of 42,000 tonnes. (Normal crop in India is 55,000 tonnes). Production estimates have been poor because heavy rainfall during the September-November season destroyed fresh spikes on pepper vines, especially in Wynad and Idukki districts.

Labour shortage is also posing a serious threat to pepper production. Even at a high wage rate (Rs 500 daily), growers are not getting enough workers for plucking the crop. Labour shortage alone could curtail two-three per cent of production this season, said Abdu, a leading farmer in Wynad.

The new crop is likely to hit domestic market by January. Pepper from southern districts of Kerala usually arrives at the terminal market by the first week of December, but it will be delayed this time by at least four weeks.