Malaysian pepper prices tumble from all-time high

The current prices are back to the levels in 2013 when the pepper market started the steep climb until first quarter-2016.

KUCHING: Domestic pepper prices have tumbled, plunging by more than 40% from their all-time highs about six months ago.

Kuching Grade 1 white pepper has slumped to RM28,500 per tonne based on Malaysian Pepper Board published price against historical high of RM50,000 per tonne, down by a hefty RM21,500 per tonne or 43%.

Similarly, Kuching Grade 1 black pepper nose-dived to RM17,000 per tonne from the peak of RM30,000 per tonne, losing RM13,000 per tonne or by nearly 43.5%.

The price fall, which was particularly steep last month, came as a rude shock to many pepper farmers who are baffled by the sharp decline.

The current prices are back to the levels in 2013 when the pepper market started the steep climb until first quarter-2016.

“Local pepper prices come down drastically last month. The drop was a straight line down and this has shocked the farmers who got caught with their holdings,” said a leading exporter,who has been in the pepper trade business for about 30 years.

The exporter, who declined to be named, said, however, that domestic prices should have corrected about three months ago after a six-year bull run as global prices had been on a downtrend then.

“At current levels, domestic prices are tracking closer to global prices. Black pepper price in Vietnam, the world’s No. 1 producer and exporter, has plummeted to US$5,500 per tonne during the September-November period against US$7,500 per tonne in the early part of this year,” the exporter told StarBiz.

For the week of Nov 21-25, with the exception of Sarawak, pepper prices in most producing countries increased after continuous decrease in the last few months, according to International Pepper Community (IPC) in its weekly report.

The report said pepper prices in Indonesia, the world’s second largest producer, showed an increasing trend, going up by 9% for black pepper in Lampung and 2% for white pepper in Bangka. For the week of Nov 29 to Dec 2, the IPC said the pepper market shown an improvement where prices at most of the origins, including Indonesia, India and Vietnam, continued in the uptrend.

However, in Malaysia, local prices had not rebounded and had remained unchanged in the past two weeks. Vietnam, Malaysia, Indonesia and other major pepper producing countries are IPC members.

A recent news report quoted Vietnam Pepper Association as saying that the country (Vietnam) exported close to 145,000 tonnes of the spice worth US$1.2bil in the first nine months of this year, an increase of 31.5% in volume as compared with the corresponding period last year. The average export price in the first eight months was US$8,141 per tonne, a decline of 13.6% from a year ago.

The report said Vietnam’s pepper farm area expanded to 100,000ha in first quarter-2016 from 85,000ha in December last year and that even unsuitable land has been cultivated with the golden crop in view of the attractive returns.

The exporter predicts Vietnam’s pepper production would go up to around 200,000 tonnes next year from 175,000 tonnes this year. That country accounts for more than 30% of world’s production.

“The rise in production is expected to put a lot of pressure on prices,” he said, noting that other countries like Cambodia which are non-IPC members, have also significantly raised productions because of big scale planting.

The exporter said Indonesia had significantly raised its production this year from 20,000 tonnes last year as large tracts of its new plantings in the past several years had produced mature berries.

“Many years ago, Indonesian farmers abandoned their pepper farms and went into the booming mining sector. When the mining sector was not doing well because of the depressed mineral prices, they went back to cultivate pepper because of the soaring prices.”

Back in Sarawak, which contributes more than 95% of Malaysia’s pepper production, the exporter expected local prices to further weaken as it has entered the bear market.

And how much lower would the prices go down? “It is anybody guess. The bear market may last another few years,” he added. At current levels, he said pepper was still an attractive cash crop compared with rubber and cocoa.

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

According to the exporter, most foreign end-users prefer Sarawak Pepper (brand name) due to its superb quality. He said Sarawak Pepper fetched a premium of around US$1,000 per tonne against Vietnamese pepper of similar standard about two years ago when the supply was tight. The premium, however, has since narrowed due to weakened prices.

He said better-off farmers were reluctant to sell their stocks at current prices as they got used to high prices in the past several years.

The exporter estimated around 3,000 tonnes of pepper were still in the hands of farmers while active local exporters have several hundred tonnes of the spice each in their inventories. Only a handful of the 20 registered pepper exporters in Sarawak are active.

“Currently, there is no shortage of the pepper supply in the local market. Dealers and exporters are in no hurry to buy in anticipation of further price decline. The situation was different in the past few years when the supply was very tight,” he said.

For his company, the exporter said it shipped between 2,000 and 3,000 tonnes of pepper a year to countries in Europe, the Middle East, South Korea, Japan, Singapore and Peninsular Malaysia.