Monthly Publication

In October 2017 the IPC pepper price index decreased 3.9 points for black and 2.8 points for white pepper (Table1). The composite price of pepper decreased by 6.3% and 4.4% to US$ 4,266 and US$ 6,254 per Mt for black and white pepper respectively in October 2017 (Table 2). Price decrease in Viet Nam and Brazil was the main factor for the decrease in the price index.

In October the market continued to weaken and price decreased further. Compared to the highest price achieved in 2015 (Jun. - Aug.), the price has reduced by around 55%. The price was more or less same with the price prevailed in 2010/11.

News reporting significant production increase in Brazil as well as the flood of Vietnamese pepper into the international market was the main reason for the decrease. The 45th IPC Session held recently in Kandy, Sri Lanka has deliberated and discussed the situation and assessed prospect of pepper in 2018. Weekly price development during September - October 2017 is given as under.

Market Outlook for 2018

The 45th Session of the IPC has over in early November 2017. Country report from producing countries has been presented, discussed and examined. Based on the country reports, latest information received and assessment made by the IPC total production and export of pepper in 2017 would be 465,000 Mt and 364,500 Mt respectively. Except in Indonesia, production and export of pepper in other source increased. Significant increases were reported in Viet Nam and Brazil. In India, Sri Lanka and Malaysia also increased at lower level. As against in 2016, total production and export in 2017 increased by 8% and 16% respectively. This was the main reason for continuous decrease in price during 2017. Production and export of pepper by main producing countries in 2016 and 2017 is given below.

Country-wise Supply

India

Pepper harvest in India mostly at the beginning of the year. During 2007, production of pepper in India was reported to be 57,000 Mt against 48,500 Mt in 2016. Area expansion taken place in last few years coupled with good weather was the main reason for the increase. According to trade statistics published by ITC, India has exported 10,500 Mt of pepper during January - July 2017. Up to December it is expected that an export volume of 20,000 Mt which was reported by India in the last IPC Session will be achieved.

Taking into account stocks brought forward from 2016 estimated at around 8,500 Mt, along with production of 57,000 Mt, imports of 16,000 Mt and domestic consumption of 55,000 Mt, the exportable supply for 2017 would be 26,500 Mt. With the exports of 20,000 Mt in 2017, carried forward to 2018 will be about 6,500 Mt.

Viet Nam

As reported in the 43th issue of the IPC Weekly Price Bulletin, Viet Nam has exported 192,000 Mt of pepper, valued at US$ 1.02 billion during January - October 2017. When compared to export of 160,000 Mt in the same period last year a significant increase of 32% in volume was recorded. Up to December 2017, a volume of around 205,000 Mt is estimated to be easily realized.

Viet Nam's crop takes place in February-April. Material from new crop was only available in the market in March. During January - February 2017, before the harvesting season, export from Viet Nam was 22,000 Mt. This means stocks at the beginning of 2016 were at least at this level. During March - August 2017 which is the most active period for Vietnamese pepper, it has shipped 145,000 Mt. From September to December monthly export is estimated on average around 10,000 Mt per month.

Beside export, Viet Nam also does imports for re-export, mainly from Cambodia and Indonesia. Import from Cambodia is estimated to increase this year while from Indonesia decreases. It is estimated total import of pepper into Viet Nam in 2017 would be around 30,000 Mt. Taking into account of 21,300 Mt carry over from 2016, production 180,000 Mt and import 30,000 Mt, total export 205,000 Mt and 7,250 Mt for local consumption respectively, around 19,000 Mt will be carried forward to 2018. Out of the total exports in 2017, around 15,000 Mt is white pepper.

Malaysia

Malaysia's pepper harvest use to begin in May. This year production of pepper in Malaysia was reported 23,500 Mt consisting of 17,500 Mt of black and 6,000 Mt of white pepper, a marginal increase from 23,000 Mt in 2016. During January - June 2017 monthly export from Malaysia was on average around 750 Mt per month. Up to August 2017, total export from Malaysia was 8,000 Mt. Export increase took place in July and August. Up to December 2017 total export of Malaysia is estimated to reach 16,000 Mt (country report). Taking into account opening stock of 11,700, estimated import of 2,800 Mt and domestic consumption of 10,750 Mt, it is estimated that about 11,200 Mt will be carried forward to 2018.

Sri Lanka

It was reported that production of pepper in Sri Lanka in 2017 is estimated to increase to 26,000 Mt as against 18,500 Mt in 2016. Export from Sri Lanka during 2016 was 7,875 Mt and in 2017 is estimated to increase to 14,100 Mt. Taking into account beginning stock of 140 Mt, import of 2,000 Mt and domestic consumption of 9,000 Mt, it is estimated there will be a carryover of 5,000 Mt for 2018.

Indonesia

As reported earlier, production of pepper in Indonesia decreased this year, mainly black pepper in Lampung. Official sources reported that production of pepper in Indonesia is estimated 68,000 Mt as against 77,000 Mt in 2016, recording a significant decrease of 9,000 Mt, mainly black pepper. Production of white pepper was relatively stable, even increased marginally this year. This was supported by increased production of white pepper in new area other than in Bangka. Other province like Kalimantan and Sulawesi also produce white pepper. Major portion of white pepper from this region is traded locally for domestic consumption.

Main harvest of pepper in Lampung and Bangka this year took place in June - August and sizeable quantities from the fresh crop came to the market in August. During January - July the export of pepper was around 20,000 Mt (10,500 Mt of black and 9,500 Mt of white pepper). Up to December 2017 total export of 40,000 Mt is estimated to be achieved. When compared to export of 53,100 Mt in 2016, a significant decrease of 25% was recorded. In addition to the lower output, current low prevailing price has contributed to the decrease in export. Domestic consumption of pepper increased in the last few years, following increased production of white pepper in non traditional growing areas.

Taking into consideration beginning stock of 15,500 Mt, reported domestic consumption of 30,300 Mt (including shortage in processing), and 1,000 Mt of import, it is estimated carry over for 2018 would be around 14,500 Mt.

Brazil

During 2016, real production of pepper in Brazil was 41,600 Mt, decreased from 44,000 Mt in 2015 and lower from 45,000 Mt projected earlier. The decrease was confirmed by significant decrease in export realized in 2016 from 38,000 Mt in 2015 to 31,100 Mt in 2016 and much lower than 39,000 Mt estimated earlier. The decrease was mainly due to weather factors.

As a result of expansion and intensive cultivation taken place in the last few years and supported by good weather this year, production of pepper in 2017 would be higher significantly from 2016. Official source reported production of pepper in Brazil in 2017 would be 58,000 Mt. Around 30-40% was produced in Espirito Santo, harvested in January- March and major portion around 60-70% was sourced from Para state harvested in August-October. During January - October 2017 Brazil has exported 46,000Mt valued at US$ 227 million as against 23,700 Mt worth US$ 195 million in the same period last year. During ten months, the export quantity increased substantially by 95%, but only 16% increase in term of value. Up to December 2017 total export of pepper from Brazil is estimated to cross 55,000 Mt. Taking into account beginning stock of 21,000 Mt, import of 300 Mt and 6,700 Mt of domestic consumption, carryover for 2018 would be 17,300 Mt. With Espirito Santo harvesting a good crop in the first semester of 2018 Brazil is reported to have shown much less interest in carry stocks forward.

Other Countries

The production estimate for China during 2017 was reported to be 29,000 Mt, mostly white pepper. China also imported around 4,500 Mt of pepper. Practically, this production and import quantity was only adequate to meet domestic consumption. Marginal quantity of around 1,800 Mt is estimated to be exported during 2017 and 3,250 Mt to be carried out as stock for 2018.

Production of black pepper from other producing countries, like Madagascar, Thailand, Cambodia and others together was around 31,000 Mt in 2017. Out of this around 20,000 Mt is estimated to be exported. Thailand however, imports pepper around 3,500 Mt annually. Taking into account of local consumption for these countries at around 12,500 Mt, a volume of 4,000 Mt is estimated to be carried out as stocks for 2018. Together with China, total carry over stock for 2018 is around 7,250 Mt.

Table 12: Production, Export and Stock Carryover of pepper in other producing countries (China, Cambodia, Thailand, Madagascar etc.) 2016 - 2017 (Mt)

Based on the summary of the statistics presented as above of the main producing countries, the below table shows the consolidated data which provides further inputs for projecting the 2018 crop.

Table 13: World's Production, Export and Stock Carryover 2016 - 2017 (Mt)

Prospect 2018

It is noticeable that pepper market in 2018 will depend much on development of production during the year. In the short term, the market will be affected by production in India and Viet Nam, in addition to the exportable stocks brought forward from 2017.

Stock brought forward from 2016 was reported 83,600 Mt. Import by producing countries in 2017 was 60,300 Mt and domestic consumption reported approximately 163,700 Mt. Taking into account 472,500 Mt of production and 372,000 Mt of export in 2017, it is estimated around 80,800 Mt would be carried forward as stocks for 2018.

In the year 2018, India reported that production may increase to 64,000 Mt from 57,000 Mt in 2017. A marginal increase is also anticipated in Indonesia and Malaysia. In Viet Nam, Brazil and Sri Lanka production is estimated to decrease. Main reason for the decrease in Viet Nam was due to too many rains occurred during flowering season in 2017 while in Brazil it was explained that less investment occurred in the gardens as a result of the low price will reduce the output. It is also projected that in 2019 production will be further lower than 2018. The decrease can be explained by the death rate vs. lack of new plantings ratio, which is believed will result in a lower production. Decrease in projection of Sri Lanka's production is based on weather cycle (weather pattern) as experienced in the past years. Assessing the above situation it is expected that there will not be much supply pressure in 2018 and that the price would be better.