Low output to trigger rally in global, local pepper market

Global black pepper production for the 2007 season (beginning December 2006) will fall short of the average crop size, as per the latest estimates of both traders and industry experts.

Pre-harvest reports by various countries forecast 20-25 per cent drop in black pepper output the world over and 30 per cent slump in the domestic pepper mart.

The reports put the total global production between 2,15,000 and 2,20,000 tonne for the season starting December, reflecting a dip of 40,000 tonne from the usual average crop size. Domestic production is pegged at around 50,000 tonne.

Only Vietnam, the world's largest producer of black pepper, is estimated to have the normal crop size of 90,000-1,00,000 tonne.

In Indonesia, the worst hit country, the El Niño factor badly affected the crop "� not only of black pepper but also of other spices such as cloves and nutmeg.

The crop size of pepper there will be around 12,000 tonne for the 2007 season, indicating a drop of 8,000 tonne from the usual output. The production of Malaysia and Sri Lanka has also been hit by various negative factors including heavy rainfall.

The lower production estimates across the world, combined with given stock position and strongly favours a rally in the global pepper market going forward, in the 2007 season.

It is also interesting to note that the history of the world pepper mart clearly shows a ten-year cycle in the price movement. In other words, traditionally, every ten years there was a steep uptrend in black pepper prices.

In India, the year 1997 was the last time when prices had shot up beyond the Rs 25,000 a quintal level, which still remains the highest-ever level in the domestic market.

If the cyclical effect works out well, it should be a favourable season for the farmers, who have been suffering losses for the last five-six years. Production in the country will be reduced to the 50,000 tonne level, as most of the producing areas have indicated lower output this season.

The northern part of Karnataka will have a production of 8,000 tonne in the coming season, against 20,000 tonne the 2006 season. The Coorg region will produce 12,000 tonne.

Kerala may produce slightly lower than the average at around 20,000 tonne as growers, discouraged by un-remunerative prices, have not paid the necessary attention to their crop.