Commodity trading – Pepper

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Pepper is one of the species which is traded in the commodity market. Pepper, which is also known as the black gold is one of the most popularly traded commodity worldwide. India is one the largest pepper producer with Kerala producing 90% of the total production. Karnataka and Tamil Nadu are the other states which produce pepper. Vietnam is now the major producer in Pepper and has gained the leadership in the global trade of pepper.

The global pepper production is about 300,000-330,000 ton per year. The countries which produce pepper majorly are Vietnam, India, Indonesia, Malaysia, Brazil, Sri Lanka, China and Ecuador. International Pepper Community, an apex body of major pepper producing countries in the world, has placed global pepper output in 2006 at 274,000 ton.

The demand of pepper in the world wide market in terms of export is estimated around 200,000-225,000 ton per year. The countries which are the main suppliers to the global market are Vietnam, India, Indonesia and Brazil. Pepper from these countries is majorly exported to countries like US, Europe, Japan and Australia.

After Vietnam entered the market after producing a good yield of pepper, sharply increased the supply and it resulted in the fall of pepper prices in the year 2000. After which in the Indian market, the cost of 1 kg of pepper which was costing over Rs.200 fell up to Rs. 65 per kg by the year 2005.

The centers of pepper trade globally are New York and Rotterdam. Malabar Grade 1, Lampung, Sarawak and Vietnam are the major names in global pepper trade parlance.

The most suitable seasons for the pepper crop in India are in the months of January to March. The major physical markets are in the regions of Kerala called Sulthan Batherry and Kalpetta in Wayanad and Kochi in Kerala. Apart from being majorly traded in physical markets, pepper is also being traded in markets worldwide electronically on stock exchanges.

India is also said to be the highest pepper consuming countries across the world. The consuming is more in the months of winter. After a good competition from Vietnam, the pepper export form India has seen a decline. Though not much raw pepper is now exported India still leads in the exports of pepper oleoresin and pepper oil in the world. Nearly 90 percent of global pepper oleoresin is produced in India.

One can always observe that the pepper produced in India is of outmost quality when compared to the pepper produced from other parts of the world.
If one has an interest to trade in pepper electronically, it is also very important to know the fundamentals of pepper. One also needs to know the producers as well as the consumers of pepper as well. Knowing well about the commodity which we trade helps us in understanding the price movements of the commodity.

The price movement of pepper also depends much on the climatic conditions. A good and a suitable climate can produce a good yield and if the supply is more than the demand, the prices decline. The case in the years 2000 when Vietnam produced a vast supply of pepper was similar. It hence resulted in the decline in the prices.