KUCHING: The domestic pepper market has fared poorly in 2022, with prices of the spice falling between 13.5% and 25% from 2021 due to a drop in global consumption.

 

Kuching Grade 1 black pepper’s price has fallen by RM4,430 per tonne, or more than 25%, to RM12,900 per tonne last Friday from RM17,330 per tonne at end-December 2021.

 

Similarly, Kuching Grade 1 white pepper lost RM3,550 per tonne, or 13.5%, to RM22,900 from RM26,430 per tonne during the same period, based on the Malaysian Pepper Board’s daily published prices.

 

The domestic pepper market has undergone a steep correction after posting a strong relief rally in 2021 due to crop failure In 2021, when both black and white pepper prices soared by about 90% from RM9,050 per tonne and 65% from RM16,000 per tonne, respectively, over the registered in December 2020.

 

At the historical peaks in 2016, black and white pepper prices hit RM30,000 and RM50,000 per tonne, respectively.

 

According to International Pepper Community (IPC) executive director Firna Azura Ekaputri Marzuki, the bearish global pepper market in 2022 was primarily due to demand erosion because of “deficit changing to surplus inventory.”

 

She said the rising interest rates in many countries to tame inflation and the war in Ukraine pushed up the prices of essential commodities while the European energy crisis and global credit crunch had caused most currencies of consuming countries to depreciate, which has led to higher cost of import.

 

“These factors and the fact that China still implements the zero-Covid policy with lockdowns has caused demand erosion for pepper.

 

“Furthermore, along with the convergence of Brazil and Indonesia (new crop) harvest, the unsold Vietnam’s inventory following China’s lockdown as well as the demand of western Europe and the United States being covered, the global pepper industry expects the bearish sentiment to persist,” she said in a statement.

 

She said China, as one of the highest pepper consumers in the world, has greatly influenced the pepper movement due to the country’s lockdown implementation.

 

Vietnam, the world’s No. 1 producer and exporter of pepper, was reported to have exported more than 208,000 tonnes of the spice in the first 11 months of 2022, and this was a drop of 37,650 tonnes or over 15% from the corresponding period in 2021.

 

As China is the traditional key export market for Vietnamese pepper, the closure of the Vietnam-China border due to the Covid-19 pandemic has affected the sales of spice to China.

 

The United States and Europe are the other key markets for Vietnamese pepper.

 

Vietnam’s lower export volume was also attributed to the higher interest rate environment, which sapped away demand on concerns of a global economic recession, while weaker currencies led to the absence of speculative activity in the pepper export market.

 

Reviewing this year’s domestic pepper market performance, Sarawak’s leading pepper exporter Nguong Aik (Kuching) Sdn Bhd director William S.C. Yii said pepper prices reached their highest levels this year in the second quarter when black pepper was traded at between RM18,000-RM19,000 per tonne while white pepper around RM26,000 per tonne.

 

“This year’s market is one of the quietest in years. Due to crop failure, Malaysia’s pepper production volume this year is slightly lower than last year.

 

“Because of the weaker prices, shopkeepers and the ‘richer’ farmers are holding onto their stocks and are reluctant to sell at the current low prices.

 

“The stocks in hand in Sarawak is quite high now. Some shops have stocked about 100 (gunny) bags of pepper and households in some longhouses have five to 10 bags of pepper inventory each,” Yii told StarBiz.

 

He said Sarawak pepper’s traditional export markets – Japan and South Korea – still offer good purchase prices.

 

On the outlook for the global pepper market in 2023, Yii said based on reports, all the major pepper producing countries, except Brazil, are expected to either maintain or reduce their production outputs in 2023.

 

He said certain regions in Vietnam have now started to harvest the new crop, and the peak harvest season is in February. With the new crop coming into the market in first quarter of 2023, it is expected to put more pressure on the global pepper price.

 

“Overall, 2023 will be another not-so-good year for the pepper market. In the first half of next year, pepper prices are expected to be maintained around the current levels but may move higher in the second half-year,” he said.

 

However, if China reopens following the relaxation of its Covid-19 measures, it will help to boost the pepper market.

 

A plus factor for the global pepper market is the normalisation of international shipping freight rates, which have come down by about 20% from last year’s peak, while the shortage of containers has been resolved.

 

Said Firna:” The global pepper supply is expected to be on the safe side due to the record harvest reported by Brazil and surplus of the end-of-the-year stock levels, which devalue the price of pepper.

 

“As we are heading towards the new crop in 2023, it would be best to take extra care in estimating the market condition. It is best to pay more attention on the demand as the supply is expected to be on the plus side.

 

“It is the view of the IPC that it is recommended to move forward by selling and buying in tranches instead of extreme speculating.

 

“It is with high hope that China will lift the lockdowns and start buying pepper (again).”

 

She said Malaysia should use use this opportunity to maintain the promotion of pepper across the markets in order to boost the consumption so as to offset the surplus inventory caused by China.