Volatile Price and Declining Profitability of Black Pepper in India: Disquieting Future

Abstract

Historically, black pepper has been a highly tradable commodity; its domestic price, production as well as profitability are highly influenced by its international prices. In 2003-04, the domestic prices of black pepper plunged down to Rs 74/kg from a peak of Rs 215/kg in 1999-2000. The study has therefore been undertaken to identify the drivers for its production, examine the profitability of the farmers and analyse the price behaviour and mechanism of price transmission in black pepper. Like other major spices, the production of black pepper in India has increased substantially over the years. Area under the crop and lagged export quantity have been the main drivers influencing pepper production in the country. From the field survey in two major black pepper growing districts, viz. Idukki and Wayanad, it has been revealed that the production of pepper has become unremunerative due to depressed prices in the domestic and/or global markets coupled with increasing input costs. Further, from the projections for production and demand for black pepper during the period 2005-2015, it is learnt that its production is going to outpace the domestic demand in a big way. This requires a serious attention because until new and diversified export markets are not exploited, the farmers would face further crash in farm gate price due to huge surplus stock. From the co-integration analysis, it has emerged that the three series of prices — farm harvest, domestic, and export, have been moving together over the years and the prices have tended to find equilibrium faster in the long-run than during the preliberalization period. The availability of disease-free planting material and financial assistance on easy terms would help the farmers to replace the senile plantation for realizing increased crop yield and profitability. The specific policies for integrating farm harvest price with retail price will not only help the producers but also make these spices somewhat more affordable to the domestic consumers.Crop Production/Industries, Marketing,