More downside risks for pepper prices amid higher global production

KUCHING: Domestic pepper prices, which have lost over 60% from their historical peaks recorded in 2016, are expected to face more downside risks due to a sharp increase in global production.

According to Sarawak’s leading pepper exporter Nguong Aik (Kuching) Sdn Bhd director William S.C. Yii, local top-grade white pepper is currently being transacted at about RM19,000 per tonne in the market, down from RM35,000 per tonne in the first quarter of 2017.

As compared to its all-time high of RM50,000 per tonne in the first half of 2016, white pepper has lost RM31,000 per tonne or a whopping 62%.

Black pepper has also lost its shine, nosediving to about RM11,000 per tonne currently from RM18,000 per tonne early last year. From the historical peak of RM30,000 per tonne, the spice has given up 63%.

“Both white and black peppers are on a continuous downtrend. White pepper may go down to RM15,000 per tonne and black pep- per to RM8,000 per tonne. This is my prediction,” Yii told StarBiz.

He backed his prediction on the anticipated bumper new crop harvest in Vietnam, the world’s number one pepper producer and exporter. Prices in Brazil, one of the world’s top pepper producers, have also come down as its new crop entered the market in the OctoberDecember 2017 quarter.

“Vietnam is projected to harvest 230,000 tonnes this year compared to an estimated 210,000 tonnes in 2017 (175,000 tonnes in 2016). Farmers are now harvesting the new crop, which will go into full swing after the Chinese New Year to April,” said Yii.

After Vietnam, Sarawak, which contributes about 98% of Malaysia’s production, will be the next to harvest the new crop.

Yii said the new crop plus carry-over stock of an estimated 15% to 20% from 2017 would put pressure on pepper prices. He said the carry-over stock was the result of farmers who were unwilling to sell due to the depressed prices last year.

He said the domestic pepper supply had fallen short of demand in the last decade, but the supply-demand situation is “more or less level” now.

While he maintains a bleak market outlook for pepper in the first six months, Yii anticipates the prices to rebound in the third quarter, but is fast to add that the recovery is unlikely to be signifcant.

“Pepper prices will remain low in these two years (2018 and 2019). The market is expected to recover in early 2020.”

The strengthening of the ringgit against the US dollar has also affected domestic pepper prices.