Cardamom prices fall on weak demand, exports may receive a boost

Cardamom prices are down from around Rs 1,000 per kg to Rs 750 to 850 per kg. The market expects the rates to decline further with a new harvest season round the corner

 PK KRISHNAKUMAR JUNE 14, 2022 / 06:33 PM IST

Robust production and tepid demand have caused prices of cardamom to decline, raising concern among growers. Small cardamom prices have fallen by over 20 percent in the last few weeks.

As cardamom growers fret over the plummeting prices, exporters reckon the low prices will boost India’s competitive edge in the global market and help them to match the record shipments of the last financial year.

Weak demand, both in the domestic market and overseas, has pushed down the cardamom prices from around Rs 1,000 per kg to Rs 750 to 850 per kg. The market expects the rates to decline further with a new harvest season round the corner.

Exports of the spice fetched all-time-high volumes and earnings in 2021-22, according to the latest figures of the Spices Board. The country exported 10,572 tonnes of cardamom worth Rs 1,375.70 crore in the year. The volumes were higher by 63 percent and value by 25 percent over the previous year.

UAE overtakes Saudi Arabia

The record exports were achieved despite Saudi Arabia imposing stringent rules on pesticide residues. Until a couple of years ago, Saudi Arabia used to be the biggest buyer of Indian cardamom. The United Arab Emirates (UAE) has now overtaken Saudi Arabia in cardamom purchases.

According to the available statistics for 2020-21, the UAE purchased 1,724 tonnes of Indian cardamom compared to 842 tonnes by Saudi Arabia.

“The exports have spread to many other countries. Besides other Gulf countries, Bangladesh has also emerged as a big buyer,’’ said Anjo Jose, executive director of Mas Enterprises, a major exporter.

Even going by the 2020-21 data, exports to countries like the US, Kuwait, Bangladesh, Canada, Singapore and Qatar have increased significantly over the previous year. This is expected to go up further in FY22 as shipments have risen sharply.

Competition from Guatemala

Although cardamom from Gautemala, the largest producer of the spice, is cheaper than the Indian variety, many buyers are going for the superior quality of the latter.

“Buyers have come to recognize the premium quality of Alleppey green bold cardamom. Indian cardamom at $14-15 per kg is around $3 higher than the Gautemalan variety,” said Hemen Ruparel, chief executive of Samex Agency, another exporter.

But presently there is a shortage of good quality export cardamom in the Indian market, which has led to the dominance of Guatemalan cardamom in global trade.

“Exporters are waiting to buy fresh stock in the new harvest season, which is expected to be in full swing by July-August,’’ Jose said.

Growers complain that climate vagaries are affecting the production quality of cardamom, grown mostly in Kerala and a few regions of Tamil Nadu and Karnataka.

“Pest menace has gone up. The chemicals we had used earlier are banned now and the new ones that are approved are not effective in controlling it. As a result, the quality of production is coming down,” said K S Mathew, a major grower.

Production in 2021-22 is estimated at over 25,000 tonnes compared to 22,520 tonnes in the previous year. The surplus production has come from new growers and non-traditional areas.

“While the big estates get hardly 300 kg an acre, the small ones are able to get almost double the quantity,” said M M Lambodharan, general secretary of the Spices Planters Association.

Weak demand from the North Indian markets and with exporters waiting for the new season, cardamom prices have become non-remunerative for the growers.

“The growers need Rs 1,200 per kg to break even considering the increasing cost of fertilizer and pesticides. Though the growing regions received copious rains in May, extreme heat this month is causing the plants to wilt. At this rate, the crop could be short by 40 percent in the next harvest," Lambodharan said.

Earlier during the year, when cardamom prices fell below Rs 800 per kg, the Spices Board implemented new steps restricting the total quantity per auction for a licensed auctioneer to 65 tonnes.

Of this, growers were allowed 70 percent of the share while the quota for licensed dealers was limited to 30 percent. This was to check the re-pooling of cardamom by dealers at auctions, which the growers said was leading to a price fall. But that was in force only for over a month and was relaxed when the prices rallied.

PK KRISHNAKUMAR is a journalist based in Kochi.

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https://www.moneycontrol.com/news/business/cardamom-prices-fall-on-weak-demand-exports-may-receive-a-boost-8686031.html

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Spices trend indications for 2022 - Black Pepper

SPICEXIM are International Brokers for seeds, spices, herbs and dry fruits. SPICEXIM is a multi-generation company with a long and respected history and has been in the business for more over a century. Below they try to provide a snapshot for different spices in 2021 and trend indications for 2022.

Black Pepper

Black pepper prices continued to firm in second half of 2021 on expectations of smaller crops in 2022, especially from the biggest origin – Vietnam, where farmers/planters disappointed at the lower prices started neglecting their plantations.
Average sized crops across Indonesia and Brazil were reported, which kept markets stable. Sri Lankan new crop is smaller, and prices have firmed up on Indian buying.

More controls have been imposed in EU for salmonella from Brazil pepper, effective from January 2022.

We expect black pepper to remain stable during the first quarter of 2022, with new Vietnam crop and Chinese New Year holidays and firm up during the middle part of the year, depending mainly on demand from China and USA.

Spices trend indications for 2022 - CLOVES

SPICEXIM are International Brokers for seeds, spices, herbs and dry fruits. SPICEXIM is a multi-generation company with a long and respected history and has been in the business for more over a century. Below they try to provide a snapshot for different spices in 2021 and trend indications for 2022.

Cloves

Clove prices moved sharply in 2021 on Indonesian small crop, buoyed by high price buying by Indonesian cigarette companies and Indian demand.

Good crops from African origin helped stabilize the prices, however the shipping line congestion complicated situation for importers.

Indonesian origin prices continue to be high, whereas African origins are lower due to the bureaucratic entanglements and shipping line issues.

Current muted Indian demand will be keenly watched during the first quarter of 2022, as new crop Madagascar consignments reach the Indian shores in Jan.

We expect cloves prices to remain stable to weak, with price spikes depending on buying by Indonesian cigarette companies

SPICES TRADE - CONSIDERATIONS ABOUT 2021 YEAR - TRENDS FOR 2022

If 2020, confined us to our homes, 2021 allowed us some freedom and many challenges in our efforts to return to the normalcy of pre-pandemic. 

THE CONTAINER

This metal box, the basic clog in the global supply chain system became the most sought after and premium component in 2021. As freight rates reached dizzying heights, finding suitable food grade empty containers at origins became a treasure hunt and in the end stages highest bidding auction situation for exporters, as shipping lines raked in billion $ profits.

The spices trade was faced with disrupted supply chain issues - farmers and planters inability to take care of crops and plantations due to lockdown restrictions and/ or reduced labour forces and weather challenges 2021, also demonstrated the inherent highly volatile nature of the spices trade. 

Many spices showed a sharp price spike on fundamental reasons but were unable to maintain the high levels due to the unstable demand situation across the globe. 

The hand-to-mouth buying trend visible in 2020 continued in 2021 and looks to be approaching the just-in-time buying philosophy, propagated by the Japanese in 2022. Extreme risk aversion is now a dominant theme, and it will only spread across major importers/buyers as new variants and vaccination protocols emerge.

For India as a major spice origin, the challenge lies in providing pesticides controlled spices, as more and more countries become stringent in their  requirements. As on date, it does look like a Herculean task unless government agencies work together with private players.

Currencies remained volatile as ever, (special mention for the Turkish Lira, which gave strong competition to the cryptocurrency markets) with the US FED continuing to print USD and dropping hints of tapering in 2022. 

With Chinese New Year in early February, Ramadan starting from early April and the big behemoths buying during the first couple of months for their yearly requirements - we expect a lot of volatility and good demand for most spices up to April, 2022 - by when hopefully also the Omicron situation will stabilize across most countries.

VIETNAM - Bottlenecks could put paid to pepper

19/12/2021 

Pepper prices have been skyrocketing to the highest level since 2018 – but with a lack of supply, many pepper growers have put little trust in the black seeds and even reduced plantations to be less dependent on the fluctuating market.

Since the export price of pepper has increased, Hoang Phuoc Binh, general secretary of the Chu Se Pepper Association in the Central Highlands province of Gia Lai found, “many farmers cannot sell at these high prices because the previous season’s pepper is already almost sold out.” Pepper farmers will soon harvest the next crop, but their output remains low as most of the pepper is still green and harvests proceed slowly due to a lack of labour. “We hope these good prices will last until the crop is harvested,” Binh said.

Economic recovery and scarce supply are pushing pepper prices up in the global markets. On October 29 in Brazil, the export price of black pepper increased by $200 per tonne to $4,200 from September 30. Meanwhile, Vietnamese black pepper exported from Ho Chi Minh City’s ports also increased to $4,500 per tonne. Nguyen Nam Hai, chairman of the Vietnam Pepper Association (VPA), is concerned whether Vietnam’s production is the main reason for the sharp increase in prices. The World Pepper Association has warned about pepper output which declined globally due to an 8 per cent drop in Vietnam’s output, though Brazil’s output remained steady, and Indonesia’s output even increased by 3 per cent.

Vietnam is the world’s largest supplier of pepper, overtaking India and accounting for 60 per cent of global exports. Last year, Vietnam’s output was expected to reach about 350,000 tonnes of pepper, of which about 90,000 tonnes were transferred from the inventory of 2019.

All forecasts pointed to a new price recovery cycle, with high global demand and a supply shortage at the end of the year. However, many farmers in Gia Lai, the pepper-growing capital of Vietnam, do not want to spend more money on this crop. Vo Hoai Nhon, farmer from in Gia Lai province’s Chu Puh district, said that expanding the pepper plantations would be “a mistake”. In 2015, when pepper had a price of about $12.15 per kg, Nhon expanded the plantation. However, the good prices did not last long, and instead reversed sharply at the end of 2019, dragging down to $1.4 per kg.

Back then, Nhon did not anticipate that the investment would not be sustainable and decided to sell some of his land as he did not want to work as a hired labourer in Ho Chi Minh City or the neighbouring province of Vung Tau like many other farmers in Gia Lai.

According to Gia Lai Department of Agriculture and Rural Development, the pepper growing area in Gia Lai amounts to nearly 16,300 hectares, while the plan for 2020 only listed 6,000 hectares.

In mid-2019, the State Bank of Vietnam gave pepper growers a way out to freeze debts for Gia Lai. At that time, banks restructured their debts and adjusted interest rates down to give out new loans and restore production.

Now, the conversion of a part of the old pepper-growing area to other crops has helped many farmers to become less dependent on pepper. Nhon still keeps a few quintals in stock that have not been sold yet as he believed, “pepper prices will continue to increase, helping to partially cover the rising costs of fuel, fertiliser, and labour.”

As the price increases, those farmers who still have pepper will eventually stop selling, which may affect the plan of export companies like Simexco Co., Ltd. As of October 31, the General Department of Customs stated that Vietnam only exported around 232,000 tonnes of pepper of all kinds, a decrease of 3.2 per cent compared to the same period in 2020.

Le Duc Huy, director of Simexco, confirmed the area for pepper cultivation has decreased by 20 per cent to around 130,000ha, resulting in a corresponding decrease in output. “I am now worried that the export volume will further decrease a lot due to very little stockpiles, and I’m not sure whether the prices will continue to increase.”

Dr. Tran Cong Thang, director of the Institute of Policy and Strategy for Agriculture and Rural Development, said that Vietnam has about 100,000ha of pepper plantations with an average yield of about 24.7 quintals per hectare, equivalent to an output of about 247,000 tonnes.

“The supply of pepper is continuing to be replenished as Vietnam is in the midst of a new harvest,” Thang noted. “However, though pepper prices have increased, they remain generally at a very low level, while production costs tend to increase.”

Pepper production costs in Vietnam in 2018 increased by at least 10 per cent compared to 2017, while the selling price of pepper decreased by over 30 per cent in that year, causing great difficulties for pepper growers. As a result, many importers have shifted their pepper supply structure to Indonesia, Malaysia, Sri Lanka, and Cambodia.

Source: VIR

19/12/2021 

https://vietnamnet.vn/en/business/bottlenecks-could-put-paid-to-pepper-801965.html

BLACK PEPPER MARKET INSIGHT WEEK 48 - PTEXIM CORP

INDIA
Pepper price up rapidly continues due to pandemic control better and huge demand in domestic.

INDONESIA
Indonesia's domestic and international pepper prices were stable this week after 3 consecutive weeks of increases due to the lack of market transactions.

MALAYSIA
Malaysian pepper prices fell due to the weakening of the Malaysian Ringgit against the USD (4.21 MYR/USD), down 1%. International pepper prices continued to be traded stably in the past 3 weeks.

SRI LANKA
domestic pepper prices continued their upward trend in the past 6 weeks.

BRAZIL
Pepper prices continued an uptrend in the past week. Freight rate is changing daily and it is not easy to find a booking.

VIETNAM
Last week, pepper prices had strongly increased at the beginning of the week, but then there was a slight correction because the market still lacked liquidity when the coffee market was still in an exciting stage.

Farmers and domestic agents continue to focus their financial budget on the coffee market, so the domestic pepper market is quiet.

However, the light berries pepper market for essential oil extraction is very busy with great demand in the domestic market/India and China.

Pepper for essential oil extraction has had an impressive increase of 5-6% in just the past week.

The Central Highlands is the main raw material area of Vietnam's pepper; Unfavorable weather , along with a shortage of workers when many localities have to take measures to prevent and control the Covid-19 epidemic, have affected the take care, harvesting and drying of coffee first in this crop year 2021/2022 and this will definitely affect the pepper crop 2021/2021 in the next couple month.

CLOVES - Decrease of Indonesian clove Exports in 2021

Nov 15, 2021

Decrease of Indonesian clove Exports in 2021 due to high freight costs and less harvest

Clove exporters from Sumatra, Java, Sulawesi reported a sharp decrease in 2021 export, especially in Q4 2021, with an estimated quantity of less than half of over 10,000 MT exported on the corresponding period last year.

Growers and exporters both attributed a lack of buying appetite to unforgiving freight costs combined with less harvest in 2021.

Indonesia 2020 cloves export is estimated to be over 40,000 MT which is much better than in 2019 at around 24,000 MT.

The price for lalpari grade is steady at the moment but predicted to steadily rise in line with the prediction of continuing climate challenges and recovered demands from clove cigarettes

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Written by
Paul Loemaksono

https://www.tridge.com/insights/decrease-of-indonesia-cloves-export-in-2021 

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