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Without warning, in the middle of September 2006 the market turned. This event has come after 6 years of sustained low prices, so buyers have been taken by surprise.
The reason this has happened is production policy in Vietnam. It was the developing acumen and expansion of production in Vietnam in the late 1990s that caused a relative surplus of pepper on the world market. Reversely cuts in Vietnamese pepper production are causing an upward adjustment in price as illustrated by these output figures-
2005 - 90,000 tonnes
2006 - 80,000 tonnes
2007 - 68,000 tonnes (projected)
Other crops may help buffer the surge in the market to an extent. The Indian crop is due shortly, followed by the Sri Lankan crop, but the Indonesian crop in August was also down 25%.
The effect on prices of oleoresin and oil has been an increase of 85% to date. This may seem dramatic but we have all become too comfortable about paying very low prices for a commodity that has an intrinsically higher value. Even current prices are lower than the cyclical low prices of the 1990s. Lionel Hitchen (Essential Oils) Ltd. will endeavour to continue to provide our customers with the highest level of service given at competitive prices and short lead times.
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