Pepper prices wait for monsoon updates
Production likely to rise to 72,000 tonnes in 2016-17 crop year against 55,000 tonnes last year
Pepper prices have been on a downward trajectory for the past one year. The fundamentals do not lend much support for any major upside. But the market is waiting for the monsoon updates to see whether the rains turn out to be favourable for the current crop.
In June last year, black pepper was trading around Rs 720 per kg. From that, it declined to Rs 506 per kg, as on last week. Even at the beginning of the calendar years, prices were trading around Rs 690 per kg. By mid-February it fell to Rs 620 per kg, by end of March Rs 610 per kg and by April last week Rs 590-580 per kg. By June prices further corrected to Rs 520 per kg.
Higher production along with lower demand from the international market and import of cheaper pepper from overseas markets have been contributing to the bearish sentiments in the commodity counter, said Hareesh V, head, commodities, Geofin Comtrade.
According to market estimates, the 2016-17 crop year will see production rising to 72,000 tonnes against 55,000 tonnes in the previous year, said Hareesh. This has been undermining the sentiments in the market. This year the monsoon predictions indicate that the production would be on the higher side. IMD had predicted a normal monsoon and rains arrived a little ahead of time as well. The pepper-growing areas of Kerala also received summer showers this time.
On the other hand, the demand has been subdued, especially that from the overseas market. Indian pepper used to be priced at a premium over other varieties in the international market for its superior quality.
In the recent years, when pepper production has been falling, traders used to import cheaper variants from countries like Vietnam and mix it with the Indian pepper. This has eroded the quality and demand for Indian pepper.
According to Spices Board, India shipped 17,600 tonnes of pepper last financial year against 28,100 tonnes in 2015-16 – a drop of 37 per cent in volume terms.
Meanwhile, imports through the Kochi port was up around 8 per cent. Increased availability and falling prices in the international market too has aided imports. Vietnam, the top producer of pepper globally, has been ramping up production in the past few years as the prices were going up between 2009 and 2015. Vietnam is expected to increase its output to over 200,000 tonnes this year from 175,000 tonnes in 2016.
Pepper cultivation in other countries too has been going up, adding to the glut in the market. Cambodia’s production has increased eight-fold since 2013 and last year it doubled.
“The current fundamentals don’t support any major upward movement in pepper. The spice would probably be trading between Rs 450 per kg and Rs 600 per kg till the end of June. By June-end, IMD will come out with its next monsoon estimate and this will decide the further course of the commodity,” said Hareesh.
The subdued prices also have made some farmers withhold crop in anticipation of better prices. Pepper has a longer shelf-life compared with other agri commodities and it is possible to hold it back without liquidating for some time. If the market finds disruption in availability, this can lend some support to prices. But it has to be seen whether the withheld produce can gather volumes that can influence the market.
Sangeetha G.