Pepper prices hit historic high of Rs 760/kg; traders struggle to meet supply

Kalpetta: With another lean pepper harvest looming for the third consecutive year, prices of black pepper have surged to an unprecedented level of ₹760/kg. The price hike is driven by mounting demand from domestic stockists, exporters and major spice companies ahead of the winter season. With supplies dwindling and the ongoing harvest season still more than two months away, market experts expect prices to touch ₹800/kg in the coming weeks.

Despite the record prices, the domestic market is facing an acute shortage of pepper, with traders and stockists scrambling to procure sufficient quantities to meet their existing supply commitments and cater to the anticipated seasonal demand.

The prices of both ungarbled and garbled pepper had crossed the ₹700/kg mark earlier this year. By the end of October, however, prices had breached the previous record of ₹750/kg.

Interestingly, the sharp rise in prices has not translated into a corresponding increase in arrivals in rural markets. With most small and medium-scale farmers having already sold their produce soon after the harvest, only a handful of farmers and planters have retained stocks in anticipation of further price increases.

The resulting supply crunch has forced traders, particularly those committed to supplying major masala manufacturers before the winter festival season, to intensify their procurement efforts.

According to Kishore Shamji, Director of the India Pepper and Spice Trade Association (IPSTA), this is the first time that pepper prices have crossed ₹750/kg.

"On Friday (November 13), prices in the terminal market at Kochi touched ₹760/kg, depending on the grade of pepper. Even in 2014, prices had briefly touched ₹720/kg before declining," he said.

He attributed the latest surge primarily to strong demand from North Indian buyers and exporters, who have been stepping up purchases ahead of the winter season. However, the market witnessed a temporary lull following Deepavali, with trading activity expected to pick up again by Monday.

Shamji also cautioned that large-scale imports from Sri Lanka could influence the domestic market. "To overcome the shortage in domestic supplies, some prominent companies have already entered into import contracts," he said.

Traditionally, North Indian stockists step up their procurement ahead of Deepavali and Mahanavami to meet the increased demand during the festival season and build up inventories for the winter months. Black pepper consumption generally rises during winter in North India, where the spice is widely used in food preparations, masala blends and traditional winter remedies.

However, the buoyancy in prices has failed to generate much enthusiasm in the rural markets, where arrivals remain thin. During the first week of November, pepper was fetching around ₹750/kg at the farm gate in Wayanad and the adjoining Nilgiris region of Tamil Nadu, said Clinto Jose, a trader based at Erumad, a border town in the Nilgiris district.

According to Clinto, the next harvest in the Nilgiris-Wayanad-Coorg pepper-growing belt is still more than two months away. The extended gap between the current limited supplies and the next harvest could sustain the upward price trend throughout the winter season, he added.

Anil Kotaram, a trader at Sulthan Bathery, said the prevailing market conditions could disproportionately benefit importers holding large quantities of low-quality pepper.

"The traders in the domestic market have very little stock left. In such a situation, importers who have accumulated large quantities of cheaper, low-grade pepper stand to make substantial profits when prices rise," he said.

Importers under scanner
The role of importers in influencing the domestic pepper market has also come under scrutiny. According to traders, some importing agencies operate through multiple companies, with one handling the regular import-export trade and another importing pepper under the duty-free or concessional arrangements permitted for re-export after value addition.

However, concerns have been raised that imported pepper meant for value addition and subsequent re-export could find its way into the domestic market when local prices rise sharply, thereby allowing importers to reap substantial profits.

Traders allege that lower-priced pepper imported from countries such as Vietnam and Sri Lanka, particularly lower-grade consignments, is sometimes diverted into the domestic market instead of being re-exported after the stipulated value addition. They also point to the absence of an effective monitoring mechanism to ensure that such imports are actually re-exported within the prescribed period.