It's hot and pricey at home

Global shortages, anticipated price hikes, futures trading and the El Nino are spurring prices for spices in India.

Stock shortages, an anticipated fall in global production, appreciation of prices in other parts of the world, futures trading and even the El Nino factor are reasons attributed to the recent appreciation of domestic spice prices.

And for spices from southern India, especially black pepper, cardamom, chilli, nutmeg and mace, it is time for prices to shoot up once again.

For black pepper, the domestic market is upbeat as the per-quintal price crossed the Rs 15,000 mark recently and is poised to appreciate further. Likewise, cardamom, ginger, chilli, nutmeg and mace are also being quoted at higher rates for the last six-eight weeks.

Hot as pepper Black pepper is witnessing a price climb-back after eight years. In 1999, the domestic market registered a price tag of Rs 25,000 per quintal for black pepper. Prices shot up to even Rs 26,000 per quintal, with the condiment's production witnessing a serious shortfall in other parts of the world.

However, the dawn of the new millennium did not bring good tidings for the "black gold" cultivators in India and the condiment's price plummeted to less than Rs 6,500 per quintal during 2005-06. The surge in the production in Vietnam and her aggressive marketing brought in a prolonged bear phase in the black pepper market.

Vietnam, the world's largest pepper producer, yields more than 1,10,000 tonnes annually and controls 60 per cent of the world trade. During the 2006 season, Vietnam's total pepper production was 120,000 tonnes. The following year, the market had initially estimated 10,00,000-tonne production.

Delay in harvesting in the country caused high order speculative trading on Indian futures market, resulting in a spurt in spot prices.

According to the latest estimates, Vietnam's production would be about 90,000 tonnes. Moreover, the eastern-most nation on the Indo-China peninsula is an aggressive producer of white pepper since 2005 and around 25,000-tonne pepper berries would be earmarked for making white pepper, which in turn would reflect in the availability of black pepper in the coming months.

Likewise, other spice-producing nations like India, Indonesia, Sri Lanka, Malaysia and Brazil will produce less during the current year, resulting in a 30-35 per cent fall. The world's total production will be around 2,00,000 tonnes instead of the normal 2,50,000 tonnes.

This is the mainstay of the sharp upward trend in black pepper prices the world over.

According to major dealers, as the US and Europe actively enter the market next month, there could be a further price hike, to the tune of Rs 20,000 per quintal.

Pepper growers in Vietnam are watching the trend in Indian futures market, the only futures contract for pepper, and setting up higher price tags accordingly.

In India's pepper-production scenario, it's not all normal in this season; production is estimated to touch only 45,000 tonnes, instead of the normal average of 65,000 tonnes.

The carry-over stock in the market is also low, since 20,000 tonnes had been siphoned off by way of exports till February 2007. The export subsidy scheme made this possible and hence the stock position is lower this season, compared to the previous one.

Earlier, it was expected that Vietnam would reduce its pepper price below $3,000 per tonne for the ASTA grade by March-April. However, the price was hiked to $3,650, propelling the current bull phase in pepper trading.

The current market parameters indicate a much hotter trend in black pepper prices for the whole of 2007.

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SNIPPETS

Cardamom catch
The cardamom market is poised for a price appreciation as the next crop season will begin only by July. The average auction price crossed Rs 400 per kg some weeks ago, and may shoot up to Rs 500 since there is good up-country demand.

Top quality cardamom fetched as much as Rs 520 a kg even as its auction trading is expected to end in three-four weeks due to depleting supply. Supply at auction centres dipped about 50 per cent, with daily arrivals between 25 and 30 tonnes.

The supply shortage caused price hikes, a phenomenon that will continue for now, traders believe.

Despite the upswings, this season is unlikely to be a repeat of the 2001-02 highs, when average cardamom price crossed Rs 620 per kg and the best quality cardamom fetched Rs 750-Rs 800. As the next cardamom production season is after 10-12 weeks, its supply will be stretched till then.

Inadequate showers also influenced the the spice's market. Although it rained in Idukki in Kerala recently, it was not enough for the crop here. Further, the domestic market does not depend much on cardamom from Guatemala, which may hit stocks.

Dear nutmeg
A huge drop in the initial harvest of nutmeg and mace, coupled with low stock position, have caused prices to go up to 10-20 per cent.

According to traders, there would be a shortage for the spices that are out of stock with the growers and stockists. The price of the best quality mace has gone up to Rs 400-450 per kg, and that of unshelled nutmeg to Rs 200-220.

April marks the arrival of the initial nutmeg and mace yield in terminal markets, but this year there is serious shortage. As per estimates of the trading fraternity, nutmeg and mace supply this season is down by at least 60 per cent.

Heavy rainfall and subsequent flowering of cardamom trees in October-November last year result-ed in a short supply this month. Growers fear there would be a dip in production in the next season too. The nutmeg and mace production season would begin by May and would be in full swing by June-July.

Although there is demand for nutmeg and mace for export, the dealers are not in a position to ensure the spices' supply in large quantities because of poor arrivals at the terminal markets.