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Commodities

Black pepper prices hit 12-year low as Southeast Asian output grows

Farmers who switched to spice in 2014 now stung by supply glut

Slumping black pepper prices may eventually spill over to retail markets.

TOKYO -- Prices of black pepper have fallen to their lowest level in about 12 years due to increased production in Southeast Asia.

When pepper prices rose between 2014 and 2016, many regional growers of natural rubber and cassava -- such as Vietnam, Malaysia and Indonesia -- switched their crops to the spice. Harvests of pepper planted at that time began around 2017, causing supply to outpace demand.

Some 725,000 tons of pepper were produced in 2017, up 10% from the previous year, according to the Food and Agriculture Organization of the United Nations.

Vietnam produced 252,000 tons in 2017, up nearly 20% on the year. The country produced a mere 50,000 tons in 2000 and trailed Indonesia and India, but has since become the world's largest supplier with a market share of 35%.

Prices of black pepper for food manufacturers currently hover between 550 yen ($4.96) and 650 yen per kilogram in Japan, down roughly 40% year on year and 70% from three to four years ago when prices peaked.

Commercial prices of white pepper, which is made by processing black peppercorns, stand between 850 yen and 950 yen per kilogram, the lowest in about eight years -- about a 40% decrease from a year earlier and a 70% drop from three to four years ago.

Given the price declines, Southeast Asian farmers are growing wary of increasing production, closely monitoring crop prices via smartphone or personal computer. "Some farmers have started hoarding pepper in the hope of fetching higher prices later," said an official at a trading house.

If prices continue to trend downward, the retail sector may also see lower prices.

Still, global demand remains strong, driven in part by the spice's rising popularity in emerging economies with growing populations and their taste for western dishes.

Use of white pepper, which is commonly used to flavor instant noodles, is also increasing as instant noodles are now found "even in rural villages in China," said an industry official.

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