Monthly Publication

In the last 44th IPC Session held from 8th - 11th August 2015 in Jakarta, Indonesia, after a detailed discussion, approved production and export estimates of pepper in 2016 would be around 397,000 Mt and 291,000 Mt respectively, as against 416,000 Mt and 302,000 Mt in 2015. Production and export was estimated to decrease by 19,000 Mt (5%) and 11,000 Mt (4%) respectively. Significant decrease in production was recorded in India, Indonesia and Sri Lanka. Taking into account of stock brought forward from 2015, import and domestic consumption in 2016, it was estimated that, around 66,000 Mt would be carried forward as stocks for 2017, which was more or less same as stock reported at the beginning of the year 2016. The stock carry over for 2017 was expected to meet only the export demand before new material from next year crops arrive in the market. Reading through these reports it was expected pepper price to remain high this year. In the last few months however pepper prices showed a continuous declining trend, particularly in Indonesia, Vietnam and Malaysia and in October the price has again decreased both in local as well as in international markets.

Table1. IPC Price Index (Base price: Average 2011 - 2015)

Table 2. Composite Price of Black and White Pepper (US$/MT)

Note: Composite prices are derived from calculation of monthly export and FOB price of the top five pepper exporting countries (Vietnam, Brazil, India, Indonesia and Malaysia)

In October 2016 the IPC pepper price index decreased 4.33 points for black and 6.33 points for white pepper (Table1). The composite price of pepper decreased by 4.17% and 5.9% to US$ 7,588 and US$ 10,408 per Mt for black and white pepper respectively in October 2016. (Table 2). Price decrease in Vietnam and Indonesia was the main factors for the decrease in the price index.

In October 2016 the market was relatively quiet, since price in many producing countries ruled at lower level. Under this situation, producers hold back limited stock, expecting to have better price in future. Prevailing Pepper prices in most producing countries has decreased between 1-10%. In India and Sarawak the decrease had been marginal with Sri-Lanka maintaining stable price, while in Indonesia and Vietnam price decrease had been significant. Price in China has also decreased by 7%.

Current declining trend of pepper price was mainly influenced by the situation of flooding pepper supply from Vietnam into international market, exceeding the projected volume. As reported earlier, Vietnam was estimated to harvest 140,000 Mt of pepper in 2016. Along with pepper imported from other producing countries like Cambodia and Indonesia a volume of around 150,000 Mt was estimated to be exported this year. Factually, up to October 2016 it was reported that Vietnam has shipped 159,000 Mt, a significant quantity exceeding the total estimate of this year. This great export capacity of Vietnam is only possible supported by good harvest this year, since supplies from other producing countries were minimal. It is presumed that around 160,000 Mt of pepper production has resulted from this harvest. It is well noted that production capacity of pepper in Vietnam is increased from year to year as a result of area expansion program taken place in the last few years, as a response toward the continuing price increase in the last ten years. In addition to the above, weather condition in the past crop season was also favorable.

In Indonesia, the price of pepper has decreased significantly by 9% in Lampung for black pepper and 10% in Bangka for white pepper. Price drop occurred after harvest was very detrimental to farmers, because production of pepper in 2016 was not as good as resulted in the previous year's harvest (2015). In Lampung even reported to have much lower than estimated earlier. The significant price decrease in Lampung and Bangka was mainly influenced by declining price trend prevailed in Vietnam. Moreover Indonesia also supplies pepper to Vietnam in significant quantity. Although portion of pepper exported to Vietnam this year decreased substantially when compared to export in previous years, because of significant fall of production particularly in Lampung. During 2015 around 40% of pepper harvested in Indonesia was shipped to Vietnam for re-export.

In India and Sarawak, the price has decreased at a marginal level; while in Sri Lanka a relatively stable price was recorded throughout the month. Vietnamese factor is likely not giving significant influence to the price trend in these three countries during the month under review. Out of the lower harvest in India in the past harvest was mainly consumed locally. Similarly for Sri Lanka, from its substantially lower production is only to meet local demand and export to India. Malaysia has traditional markets, like Japan, Taiwan, China and South Korea who buy pepper with a relatively higher price.

The declining trend is likely to continue until upcoming crop season in India and Vietnam becomes clear. In the last 44th Session it was adopted that production of pepper in 2017 was projected to be better, mainly due to estimated increase in India, Indonesia and Sri Lanka. Observing current situation, whereas heavy rains occur every day in Indonesia as well as un-favorable weather also reported in some producing countries, we may have to wait and see the development to conclude the prospect of the future market.

Black pepper prices prevailed in the local markets are shown in Table 3 and FOB prices in Table 4; while for white pepper are shown in table 5 and 6.

Table 3. Local Price of Black Pepper in US$ per MT

Table 4: FOB Prices of Black Pepper in US$ per MT

Table 5: Local Prices of White Pepper in US$ per MT

Table 6: FOB Price of White Pepper in US$ per MT