Pepper – The Return of Black Gold?

Spend Matters welcomes this guest post from Jara Zicha of Mintec.

Pepper prices have climbed to a historic high in recent months on the back of surging demand and dwindling stocks. Consumption has increased rapidly in recent years in regions such as Southeast and East Asia. The spice once labelled “black gold” may see its title restored.

Pepper prices have climbed to a historic high in recent months on the back of surging demand.

The significance of pepper within the international spice trade is undeniable and, along with salt, is probably the most important spice in our kitchens. Pepper is generally identified by either the region it is grown in, or by its color. The varieties recognized by global trade are Lampung and Muntok (Indonesia), Malabar and Tellicherry (India), Sarawak (Malaysia) or simply Brazil and Vietnam. Pepper is also categorized as black, white, green and red.

In recent years, the importance of pepper in global trade has been increasingly acknowledged by its producers, traders and possibly by us as well, as the consumers. The reason for this is its rapidly increasing price. Only once since 2001 has the price of pepper fallen significantly – in 2008 due to a bumper crop from Vietnam. Since 2008, prices have continued to rise. Back in 2006 pepper traded for $1,500 a ton; now it’s around $12,000 a ton depending on origin and variety. White pepper is generally more expensive because it requires extra processing, which results in wastage.

Global pepper consumption rose by 60% between 1991 and 2011 to reach 430,000 tons. This rise in consumption has been fueled by significant increases in some of the major producing countries of Vietnam, Indonesia, India, Brazil, China and Sri Lanka. Consumption in Southeast Asia has surged nearly fourfold over the corresponding period, while demand from China has risen more than 200%. Demand from the mature markets has increased at a much slower rate, by 15% in Europe and 45% in Northern America. Much of the sharp increase in consumption in Asia has been attributed to increased appetite for meat products, which benefit from more pepper seasoning, as well as the general rise in wealth and disposable income.

In recent years, consumption has been annually exceeding production, resulting in a continual reduction in global stocks. Production forecasts have been mixed this year for the largest 2 black pepper producers, India and Vietnam. In India, production this year is expected at 70,000 tons, up almost 100% year-over-year, resulting in Indian prices falling below the Vietnamese price and making them more competitive globally. Production in Vietnam in 2015 has been forecast between 130,000 and 140,000 tons, slightly below last year’s crop, which is estimated between 150,000 and 160,000 tons.

Even though prices are climbing and the current conditions are more favorable to producers, consumers need not worry much about price, as by definition a spice is “an aromatic or pungent vegetable substance used to flavor food.”

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