The decline in the rupee has come to the aid of pepper exporters, as prices of Indian varieties in the international market are now more competitive. They are in a position to offer a low U.S. dollar price, at a time when their biggest competitor, Vietnam, is not in the market.
Indian pepper’s benchmark price in the international market was quoted 14 per cent lower at $7,150 (€5,473, £4,600) a tonne from $8,350 (€6,392, £5,372) a tonne in October. In rupee terms, the price has fallen to Rs 3.74 lakh ($7,097, €5,432, £4,566) a tonne, as the average rate of the rupee is 52.34 against the dollar. In October, price was Rs 4.11 ($7,799, €5,970, £5,018) lakh a tonne, as the average rate of rupee against the dollar was Rs 49.25. Pepper in the domestic market was stable at Rs 370 ($7.02, €5.37, £4.52) a kg.
This has evoked good response for Indian black pepper from foreign buyers. Exporters also expect the dollar to rise further.
The problem with India is low stock. According to leading exporters, the total stock in the country is around 3,500 tonnes, which might be sold within the next couple of weeks. So, India may run out of pepper even as the rupee continues to tank against the dollar. This season, pepper production is estimated to be lower than last year due to heavy rain, which affected the spice’s flowering in Kerala.
Production is estimated to be 43,000 tonnes, compared to 48,000 tonnes last year. Harvesting is yet to begin in most parts of Kerala, so the arrival to terminal markets is thin. Arrivals in the spot market are expected to trickle in by the last week of December, but heavy arrivals will only begin by January.
So, the export business may be affected badly till the new season begins. The benefits of the dollar appreciating can be enjoyed only if supply improves.
Farmers in Kerala prefer to grow rubber instead of pepper, as the returns are much better.
“Pepper has started to give better returns only this year. There have been no incentives for farmers to cultivate pepper,”said Jojan Malayil, a Kerala-based trader.
Last year, growers received Rs 250 ($4.74, €3.63, £3.05) a kg compared to Rs 350 ($6.64, €5.08, £4.27) a kg they are receiving now. Export of pepper has picked up pace in the last month and have more than doubled to 2,250 tonnes from 1,000 tonnes the previous month, said Malayil.
Export from India has also gone up as Vietnam does not have stock to export. Exports from April to October were up 33 per cent to 20,000 tonnes, against 10,350 tonnes last year.
The weakness in the rupee, has been beneficial for exporters, but the overall demand for pepper has also been good, helping the exporters, traders said.