Netherlands-based Nedspice estimates global pepper production to decline this season by 74,000 tonnes for the first time after several years, mainly driven by unfavourable weather in Vietnam, reports Financial Express. However, the mismatch between global supply and demand of the spice will continue to put pressure on the price with supply seen higher by almost 60,000-70,000 tonnes.
Rajiv Palicha of Nedspice India told Financial Express that there was still enough supply of pepper in the global market, and the market is likely to remain range-bound and estimated to increase gradually only in the long-term.
Pepper Crop Report 2020 by Nedspice estimates that the total pepper production in crop season 2019-20 will be at 5,58,000 tonnes, which still remains significantly higher than total demand of 4,96,000 tonnes. The report adds that the excess production will cause global stocks to increase further, as it will likely to take some time before supply lines align with demand. Prices are close to or below production costs in many countries.
The report mentions that continuing excess production is pushing the ratio of global stocks, relative to demand, close to the previous high and price bottoms tend to occur around stock-ratio highs. Historical data suggests that the market has seen the largest part of the decline, although it may take more time before reversal sets in, the report adds.
The report states Vietnam production is estimated to drop 18 per cent, largely due to unfavourable weather. Brazil’s crop remains above 90,000 tonnes this season, Indonesia is expected to see a decrease in production to 55,000 tonnes and India is expected to have a good crop of 74,000 tonnes this season.
Indian production is estimated to increase by 7 per cent over the last season. The new harvest eason will also bring in new supply and this would ease the pressure on the market, traders feel. An excess of 70,000-75,000 tonnes of pepper in the market is not very big, particularly with Chines consumption increasing significantly. China has overtaken US as the largest market for pepper and consumption of pepper in China could touch 90,000 tonnes in 2020.