PEPPER – The Way Ahead.. GIBY MATHEW Managing Director JRG Wealth Management Ltd, Cochin.

1. PEPPER – The Way Ahead..GIBY MATHEWManaging DirectorJRG Wealth Management Ltd, Cochin.

2. INTRODUCTION • Pepper – the ‘King of Spices’ • Distributed all over the world • Pepper is a berry of ‘Piper Nigrum’, a perennial shrub. • Also called ‘Black Gold’ due to its durability and value.

3. Characteristics of Pepper Plant • The pepper plant requires a long rainy season, fairly high temperatures, and partial shade for the best growth. • They begin bearing in 2 to 5 years and may produce for as long as 40 years

4. INTRODUCTION • Major Producers • Vietnam (85,000 MT) • Indonesia (67,000 MT) • India (65,000 MT) • Brazil (35,000 MT) • Malaysia (22,000 MT) Malabar Grade ofpepper from India traded at Kochi, Kerala is considered to be thepremium grade of pepper, and it rules above the international grades.

5. Pepper - Major Uses • Domestic Uses • Culinary usage (as a spice) • As a preservative • Industrial Uses • Oleoresin industry (Extracting oil from pepper) • Pharmaceutical industry

6. International Grades of Pepper Grades - Mainly based on the name of place • Malabar Garbled (MG1) – India • Lampung – Panjang , Indonesia • Sarawak – Kuching , Malaysia • Vietnam - HCM City ,Vietnam

7. Futures Trading in Pepper • World’s oldest Pepper Exchange IPSTA has been functioning in futures trading in pepper since 1957. • Major National level Exchanges – India • National Multi Commodity Exchange (NMCE) started on 26-Nov-2002 • National Commodity and Derivative Exchange (NCDEX) started on 15-Dec-2003

8. Benefits of Futures Trading in Pepper • Benefits of futures trading would include • Better price discovery • Hedging • International price knowledge • Seasonal and off-seasonal production forecast. • Easy and transparent delivery system.

9. Benefits of Futures Trading • Parallel movement of spot and future rates is beneficial for all kind of traders.

10. Production around the Globe

11. Production around the Globe • The global production of pepper fluctuates between 3-3.5lakh MT, with a production of 2.9 lakh MT recorded in2005. • After increasing for continuous years till 2003, pepper production has remained relatively steady in the subsequent years (2004 & ’05), and the estimated production for 2006 is still lower.

12. Production & Distribution around the Globe • Supply of pepper has seen a dramatic increase over the lastten years (except the current year). • Vietnam’s sudden increase in production has resulted inthe global production, increasing to 3-3.5 lakh MT from1.9-2 lakh MT in the late nineties. (due to Agricultural & Technical support from Govt.) • Vietnam is the world’slargest producer and exporter of pepper in the world now.

13. Production – Indian Scenario • Considering the Indian scenario, the average yearly production for the 5 years (2001 – ’05) has been slightly higher compared to the previous 5 years (1996 – 2000). • Production of pepper in India has declined in the recent years.Its production was 62,000 MT in 2004 against 65,000 MT in2003 and 80,000 MT in 2002. • This recent declining trend is not a healthy indication of the pepper output from India, who has been getting premium rates for its pepper.

14. India in Pepper Industry • USA, Canada, Japan and Gulf countries are the favoureddestination for Indian pepper.

15. Vietnam – The Key Driver of Pepper Market

16. Impact of Vietnam Production • The continuously Increasing production tendency in Vietnam from 1999 till 2005 pushed down the world pepper prices compared to the years just before.

17. Reasons for the Recent Uptrend in Pepper • According to IPC (International Pepper Community) world pepper production is estimated to be 15 - 20 % lower in 2006. • In producing countries except Vietnam, pepper production for 2006 is estimated to be lower. • Most of the countries have sold out their current year output – Vietnam has sold about 60% of this year’s production leaving 25,000 MT in the reserve. • Reasons for Recent Fall in Production - Lower prices during last few years discouraged farmers from spending more for taking care of their pepper vines. - Past lower prices and high input cost prompted many farmers to switch to other more profitable commodities. - Diseased vines. - Adverse climatic conditions in some of the growing countries. - Declining Carry-over Stock

18. Harvesting Season of Pepper

19. CONCLUSION • Harvesting Season in almost all the major producing countries is over. • Season in India, Sri Lanka and Thailand are approaching. • Further rate movements would depend on the rate of Indian parity, being the premium grade.

20. CONCLUSION • According to IPC (International Pepper Community) world pepper production is estimated to be 15 - 20 % lower in 2006. • World pepper production for 2006 is projected to be 2.65 lakh MT, against the estimated production of 2.9 lakh for 2005. • According to IPC studies, world pepper consumption is growing at a rate of 3.46 per annum. • The US remains the single largest importer of pepper, with a share of 23 % of the world market. • US imports have shown an annual growth of 5.46 % during the last few years.

21. CONCLUSION • Expecting trading in the range $2600 - $3300 in the near future. • Further rate movements beyond the range can be expected according to higher rate offering from India, since the Indian season is approaching.

22. THANKS..