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

Historically, black pepper has been a highly tradable commodity; its domesticprice, production as well as profitability are highly influenced by itsinternational prices. In 2003-04, the domestic prices of black pepper plungeddown to Rs 74/kg from a peak of Rs 215/kg in 1999-2000. The study hastherefore been undertaken to identify the drivers for its production, examinethe profitability of the farmers and analyse the price behaviour andmechanism of price transmission in black pepper. Like other major spices,the production of black pepper in India has increased substantially overthe years. Area under the crop and lagged export quantity have been themain drivers influencing pepper production in the country. From the fieldsurvey in two major black pepper growing districts, viz. Idukki andWayanad, it has been revealed that the production of pepper has becomeunremunerative due to depressed prices in the domestic and/or globalmarkets coupled with increasing input costs. Further, from the projectionsfor production and demand for black pepper during the period 2005-2015,it is learnt that its production is going to outpace the domestic demand ina big way. This requires a serious attention because until new and diversifiedexport markets are not exploited, the farmers would face further crash infarm 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 havetended to find equilibrium faster in the long-run than during the preliberalizationperiod. The availability of disease-free planting material andfinancial assistance on easy terms would help the farmers to replace thesenile plantation for realizing increased crop yield and profitability. Thespecific policies for integrating farm harvest price with retail price will notonly help the producers but also make these spices somewhat moreaffordable to the domestic consumers.