Prices of pepper will remain under pressure

Tags: Commodities

Output is coming down every year on higher labour charges

Prices of pepper will remain under pressure
Pepper prices will remain bearish in the coming months as output for the year is estimated to be higher and export demand lower. Pepper prices have fallen considerably from the recent high levels in August and are not expected to move above Rs 400 per kg levels in the medium term.

In August, prices had touched a high of Rs 458 per kg as deficient rains in the initial months of south west monsoon heightened assumptions of a lower output for this year. Last year the country produced around 43,000 tonnes of pepper and this was the lowest level in one decade. Production has been coming down year-after-year due to higher labour charges and inadequate steps to replace old wines with new ones. In 2002-03, pepper production was as high as 70,000 tonnes.

The drought-like situation in August made traders estimate production for the year to be around 40,000 tonnes and this upped the prices to Rs 450 levels. However, by September improved in Karnataka and Kerala. The new estimates pegged this year’s production at around 60,000 tonnes, said Ved­ika Narvekar, senior res­earch analyst, agri commodities, Angel Com­m­odities.

The higher production estimates pulled down prices to Rs 407 per kg in September. Meanwhile the International Pepper Co­m­munity also increased the output estimates for the year to 3.27 lakh tonnes from last year’s 3.18 lakh tonnes following higher production in Indonesia and Malaysia. As a result, the export demand for Indian pepper, which is priced at a premium over international pepper, came down since October.

Prices fell below Rs 400 per kg levels to a low of Rs 367 in November. In December it made a low of Rs 338 per kg. However, there was some recovery in January to Rs 375 level after around 8,000 tonnes of pepper were seized from six warehouses in Kerala. Pepper from the National Commodity & Derivatives Exchange (NC­DEX) acc­r­edited ware­h­ouses were seized by Food Safety and Standards Aut­hority of India following comp­laints about adul­teration.

The move, however, depl­eted stock levels in the exchange warehouses. In­s­ufficient stocks for delivery saw prices recovering to Rs 375 levels. Further, demand for pepper from Tamil Nadu during Pongal festival was also strong.

Prices are ruling at the Rs 370 levels. “Prices could remain on the positive side in the short term as the stock levels in the warehouses are still low. On the upside it can move to Rs 390 and in the downside to Rs 340. However, when fresh crop arrives in the market by , prices will once again come under pressure,” she said.

Prices can move below Rs 340 in the coming months, but Rs 320 is unlikely, as the farmers will hold on their crop when the prices fall. “Farmers have seen

Rs 450 level in recent , and so, they will not sell their crop for price lower than Rs 340 per kg. In such a situation prices would recover, but above Rs 400 per kg is unlikely considering higher production and lower exports,” she added. zz

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