Indian pepper touches Rs 500 per kg after a gap of four years

The pepper plucking season starts by December and extends until March.

Black pepper prices have risen to more than Rs 500 per kilo after a gap of four years, driven by higher requirements during the festival season and the release of pent-up demand following the easing of the COVID-19 pandemic.

Pepper prices began shooting up with the onset of the festival season, and rose by over 5 percent in the past one week to Rs 511 per kg. Traders and exporters expect prices to remain high until the harvest season goes into full swing early next year.

The pepper plucking season starts by December and extends until March.

The increase has also been fuelled by reports of a lower crop next year owing to an inclement climate.

Unlike other pepper producing countries, Indian pepper prices are largely determined by the domestic demand, which accounts for the lion’s share of annual production of around 60,000 tonnes.

“There has been an increased demand from the caterers, hotels, weddings and the savouries manufacturers. The demand is especially high from the food industry of Haryana, Gujarat and Rajasthan,’’ said Kishor Shamji, managing director of Kishor Spices.

Global pepper prices have escalated since June as China stepped up its purchases and production fell in Vietnam, the largest producer of black pepper.

“The prices in Vietnam, Brazil and Indonesia are ruling in the range of $4,300-4,500 per tonne, almost double the rate in the previous year,’’ said Jojan Malayil, chief executive officer (CEO) of Bafna Enterprises.

Malaysian pepper is selling at $5,200 per tonne while Indian pepper carries the highest price tag of $6,780 per tonne, making it uncompetitive in the global market.

Indian pepper prices began increasing in the last couple of months as domestic demand grew. The increase is over 30 percent year-on-year. It was in 2017 that the pepper prices last exceeded Rs 500 per kg mark and stopped short of Rs 600 per kg.

``Lot of illegal import used to come from Vietnam via Myanmar to India. But this has stopped after the new government came to power in Myanmar. This used to go to North Indian markets. This could be a factor in price increase,’’ Malayil said. According to Shamji, the shipment of several hundreds of tonnes of pepper imports from Sri Lanka have been held up because of a court case.

Indian pepper exports have stagnated around 16,000 to 17,000 tonnes in the last few years. Majority of the volumes are value addition of pepper imported from Vietnam and Sri Lanka. As a result, India has become a net importer of pepper. Imports of pepper for exports stood at 22,469 tonnes during January to September, 2021, a 37 percent increase year-on-year, Shamji said.

The share of Indian pepper in the exports is minimal now because of the high prices. Unlike Vietnam and Brazil, which are dependent on exports, India has a robust domestic market.

A freight rate increase and container shortages have impacted pepper shipments. “The freight rate to the US has gone up five times to $15,000 per container. The US is sourcing more pepper from Brazil, which is nearer,’’ Shamji said.

The export rates are fixed in advance during the harvest time.

“So the exporters are forced to absorb the freight rate hike and ship at a loss,’’ said an exporter who didn’t want to be identified.

According to a research report by Nedspice, a Netherland-based spice processing and distribution company with branches worldwide including in Vietnam and India, Vietnam’s pepper production was down by nearly 18 percent year-on-year at 201,000 tonnes in 2020-21 due to unfavourable weather and pandemic-induced passive farming.

The drop was marginal in Brazil, the second biggest producer of the spice. This nullified the gains made by other major producers, India and Indonesia.

The report says the global production will be about 12 percent short from the previous year at 497,000 tonnes while the demand has increased post-COVID to 505,000 tonnes. However, the report notes that the global stock position was strong as exports have been good despite logistics bottlenecks.

Indian pepper farmers are expecting a lower harvest next year because of changing climatic conditions. Karnataka is India’s chief pepper producing state followed by Kerala.