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Pepper Market Turns Hot Again

Original Source:
http://www.thestar.com.my/business/business-news/2017/01/02/pepper-market-turns-hot-again/

Retrieved on: 16th January 2017

Spicy commodity: According to International Pepper Community weekly reports, Indonesia’s black and white pepper prices have increased by some 10 in the past one month or so
Photo Credit: The Star.com

KUCHING: A leading pepper exporter, who was bearish about the market due to plunging prices two months ago, has now turned bullish because of unexpected positive developments brought about by declining supplies and inclement weather.

Nguong Aik (Kuching) Sdn Bhd director William SC Yii said the latest developments have resulted in a complete change in the market scenario to bullish from bearish mode, resulting in the recovery of global pepper prices.

He said the global supply has become limited as Indonesia, the world’s second largest pepper producer, had sold its entire new harvests.

Indonesia is estimated to have harvested between 28,000 tonnes to 30,000 tonnes, which were significantly higher than the production in 2015.

According to International Pepper Community (IPC) weekly reports ,Indonesia’s black and white pepper prices have increased by some 10% in the past one month or so.

By mid-December,the report said the market had firmed up further as prices in most producing countries continued with their uptrend, likely due to stocks in producing countries had limited.Towards the year-end holidays, the market slowed down with limited trading activities.

In Brazil,the IPC said the output of recent harvest was not as good as estimated earlier.

“From India, it was reported that the harvest is delayed due to unfavourable weather condition and that output of current harvest would be lower than earlier estimation,” added IPC.

Yii said Vietnam, the world’s No. 1 producer and exporter, was hit by severe storms and heavy rains in the past month or so, and the adverse weather had slowed down internal logistic in transporting pepper to warehouses. Also pepper shipments scheduled for December have to be delayed to this month or next.

“Vietnam’s new crop which normally comes in February may delay to end-March due to the Chinese New Year celebrations (end-January to February),” he told StarBiz.

Vietnam, which contributes more than 30% of global production, was reported to have raised exports by 31.5% to nearly 145,000 tonnes worth US$1.2bil in the first nine months of last year against the January-September 2015 period.

Yii said unexpectedly, there was a bigger demand for the spice from China in December because winter had come earlier.

As all these factors had influenced price trend,he said global prices for both white and black pepper had improved by about US$600 per tonne from recent lows.

For normal FAQ, global white pepper currently fetches around US$10,000 per tonne while it is between US$6,900 and US$7,000 per tonne for black pepper.

Likewise, he said domestic prices had recovered from their November lows –RM28,500 per tonne for Kuching Grade 1 white pepper and RM17,000 per tonne for black pepper. Last Friday, the white and black pepper rebounded to RM30,000 and RM18,500 per tonne respectively based on Malaysian Pepper Board’s (MPB) published rates.

“Exporters,especially those on short covering,are paying much higher than the MPB’s published prices to get supply as this is off harvest season. For the white,they have been paying up to between RM32,000 and RM33,000 per tonne and up to RM22,000 per tonne,” said Yii.

According to him, local pepper exporters normally sell forward by three to six months.

In 2016,domestic pepper market was volatile. The year started with Kuching Grade 1 white and black pepper staying at all-time high of RM50,000 per tonne and RM30,000 per tonne respectively.

The record prices were maintained for nearly six months before correction for the six-year bull run set in.The price drop was especially drastic in November.

Year-on-year, domestic white pepper price slumped by RM20,000 per tonne or 40% in 2016 while the black by RM11,500 per tonne or about 38%.

The run up in prices started in 2009 when domestic white and black pepper were hovering around RM11,300 per tonne and RM6,500 per tonne respectively.

“I see bullish market in the first quarter this year (2017).Global white pepper is expected to trade between US$9,600 and US$10,600 per tonne (current about US$10,000 per tonne) and black pepper between US$6,500 and US$7,500 per tonne (US$6,900-US$7,000 per tonne),” said Yii.

He said for the past decade,global pepper demand had exceeded supply.

According to IPC 2016’s projection, global consumption for the year is 463,000 tonnes against production of 414,000 tonnes, resulting in a supply deficit of 49,000 tonnes.

Nguong Aik,which has been in the pepper trade business for about 30 years, exported more than 2,000 tonnes of pepper last year to countries in the Middle East, Europe, South Korea, Japan, Singapore and Peninsula Malaysia.

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