[Title]
[Date]
Crop report - Pepper
Jos van Gulick
China Spice Conference
1 November 2018
Wuxi, China
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2005 2006 2007 2008 2010 2011 2012 2013 2015 2016 2017 2018
US
$ /
MT
Black Pepper FOB
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2005 2006 2007 2008 2010 2011 2012 2013 2015 2016 2017 2018
US
$ /
MT
Black Pepper FOB White Pepper DW FOB
2
Black pepper low at
US$1,373/MT in Jul-05
Black pepper peaks at
US$9,976/MT and white pepper
at US$14,621/MT in Jun-15
Note: Monthly price data as per 15-Oct-18.
1) Average of ASTA quality Vietnam, Lampung and Brazil.
Source: Nedspice research.
Vietnam @ US$ 2,853 / MT
Brazil @ US$ 2,400 / MT
Lampung @ US$ 2,870 / MT
Have we seen the bottom yet?
3.3 years
1
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
US
$ /
MT
Black Pepper FOB White Pepper DW FOB1
Production
Stock
Acreage
Plantings
Survival rate
Yield
Region
Cost price
Substitutes
Information
Knowhow
Weather
ChemicalsFertilizer
Holding power
SpeculatorsKnowledge
Culture
Holding costs
EfficiencyDecay
Innovation
Regulations
Import tariffs
Tax
FX
M&A
Size
Culture
GDP growth
Population growth
Inflation
Food trends
New applications
Local consumption
Export
Middle class
Healthcare
Sustainability
Organic
TraceabilityRegulations
Speculators
Source: Nedspice research.
Supply Price Demand
3
Fundamental market forces
4
Equator
Vietnam
India
Brazil
Indonesia
China
Cambodia
Malaysia Sri Lanka
Others
Global production
Note: Based on 2018 production estimates.
Source: Nedspice research.
147 143 153
139
178
210 218
–
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
50
100
150
200
250
300
350
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
5
Note: Based on 2018 production estimates.
Source: Nedspice research.
Vietnam
89%
Vietnam vs RoW Black vs White
Dak Lak 28%
Gia Lai 15%
Dak Nong 15%
Dong Nai 14%
Binh Phuoc 10%
Ba Ria Vung Tau
9%
Others 9%
Production over time (KMT)
Production per key area
38%
L3Y Avg.:
14%
Video placeholder: VietnamVietnam - Crop video
Due to heavy rainfall following the creation of
this video the estimated yield is slightly less
than suggested in the video. The crop
estimates in this presentation take into
account the latest views.
Harv
est cale
ndar
– – – 7 20
73 108
64
– – 2 –
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
147 143 153
139
178
210 218
273
–
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
50
100
150
200
250
300
350
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
7
Note: Stock positions are calculated based on estimates of monthly production, consumption, import and export volume, using trade statistics over the last twelve months.
1) Last twelve months export figures as per Sep-18.
Source: Nedspice Research, ITC.
Vietnam production is at an all-time high and is again expected to increase significantly this season
Production over time (KMT) Next 12 month stock development (KMT)
+25%
L3Y Avg.:
5%
Sto
ck d
evelo
pm
ent
88 77 68 63 67 126
202 238 213 189 169 144
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
Oth
er
consid
era
tions
+
‒
‒
88
7
233
Stock Sep-18
Consumption
Import /Export +24.7%1
38 39 42
52 53
65
82
(15%)
5%
25%
45%
65%
85%
(15)
5
25
45
65
85
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
8
Note: Based on 2018 production estimates.
Source: Nedspice research.
Brazil
Brazil vs RoW Black vs White Production over time (KMT)
Production per key area
98%
Pará 54%
Espírito Santo 40%
Bahia 5%
Others 1%
L3Y Avg.:
30%
14%
91
38 39 42
52 53
65
82
(15%)
5%
25%
45%
65%
85%
(15)
5
25
45
65
85
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
10
Brazil becomes No. 2 origin with an expected increase to 91KMT
Production over time (KMT) Next 12 month stock development (KMT)
L3Y Avg.:
7%
+12%
Note: Stock positions are calculated based on estimates of monthly production, consumption, import and export volume, using trade statistics over the last twelve months.
1) Last twelve months export figures as per Sep-18.
Source: Nedspice Research, ITC.
Sto
ck d
evelo
pm
ent
29 42
55 58 61 56 52 49 49 44 41 35
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
Harv
est cale
ndar
11
22 21
10 10 1 3 3 3 0.1 0.2 –
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
Oth
er
consid
era
tions
+
‒
‒
29
7
70
Stock Sep-18
Consumption
Import / Export +46.8%1
54
63
35
86
45
65
92
(10%)
10%
30%
50%
70%
90%
(10)
10
30
50
70
90
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
11
Note: Based on 2018 production estimates.
Source: Nedspice research.
India
India vs RoW Black vs White Production over time (KMT)
Production per key area
16% 100%
Karnataka 50%
Kerala 32%
Plains/lowlands 10%
Tamil Nadu8%
L3Y Avg.:
1%
Floods overlapped with major pepper producing areas in India
12
Source: Nedspice research, NASA.
Recent floods in India hit major pepper growing areas; Overall impact on production is estimated to be c. 7 KMT
Illustrations
Karnataka1
Kerala2
1
2
− Most important impacted regions are Kodagu, Hassan and Chikkamagaluru
− Floods and landslides destroyed c. 10% of the yielding area
− Yield is estimated to be 5% less due to a weaker berry setting
− Overall impacted expected to be 5KMT
− Most important impacted regions are Idukki and Wayanad
− Floods and landslides destroyed c. 10% of the yielding area in Wayanad
− Yield is estimated to be 5% less due to a weaker berry setting
− Overall impacted expected to be 2KMT
1. Land slides
2. Dead vines
3. Mudflows
1
2
3
Overall impact estimated to be 10% of
production, resulting in a decrease of c. 7 KMT
60 54
63
35
86
45
65
92
(10%)
10%
30%
50%
70%
90%
(10)
10
30
50
70
90
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
13
India is expected to have a lower crop of 60 KMT this season, also impacted by the heavy rains and floods last August
Production over time (KMT) Next 12 month stock development (KMT)
L3Y Avg.:
(2%)
(35%)
Note: Stock positions are calculated based on estimates of monthly production, consumption, import and export volume, using trade statistics over the last twelve months.
1) Last twelve months export figures as per Sep-18.
Source: Nedspice Research, ITC.
Harv
est cale
ndar
– – –
9 15 18
12 6
– – – –
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
Sto
ck d
evelo
pm
ent
80 77 73 77 87 101 109 110 107 103 99 96
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
Oth
er
consid
era
tions
+
‒
+
80
63
16
Stock Sep-18
Consumption
Import /Export +107%1
70
47
57
70 65 65 67
–
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
10
20
30
40
50
60
70
80
90
100
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
14
Note: Based on 2018 production estimates.
Source: Nedspice research.
Indonesia
Indonesia vs RoW Black vs White Production over time (KMT)
Production per key area
12% 39%
L3Y Avg.:
9%
Bangka 47%
Lampung 32%
Kalimantan 16%
Others 5%
Harv
est cale
ndar
11 – – – – 1 1 – – 3
14
32
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
60
70
47
57
70 65 65 67
–
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
10
20
30
40
50
60
70
80
90
100
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
16
Indonesia is expected to see a decrease in production to 60KMT, driven by a decrease in Lampung
Production over time (KMT)
L3Y Avg.:
8%
(10%)
Next 12 month stock development (KMT)
Note: Stock positions are calculated based on estimates of monthly production, consumption, import and export volume, using trade statistics over the last twelve months.
1) Last twelve months export figures as per Sep-18.
Source: Nedspice Research, ITC.
Sto
ck d
evelo
pm
ent
41 36 31 27 23 20 17 13 9 9 18
45
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Fe
b-1
9
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
Oth
er
consid
era
tions
41
11
40
Stock Sep-18
Consumption
Import /Export
(26.8%)1
+
‒
‒
34 35 37 38 38 38
35
–
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
10
20
30
40
50
60
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
17
Note: Based on 2018 production estimates.
Source: Nedspice research.
China
China vs RoW Black vs White Production over time (KMT)
Production per key area
L3Y Avg.:
0%
6% 100%
Hainan 100%
34 35 37 38 38 38
35 33
–
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
10
20
30
40
50
60
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
Harv
est cale
ndar
18
9
– – – – – – – – –
8
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
18
China’s crop size is estimated to decrease to 33 KMT this season
Production over time (KMT)
L3Y Avg.:
0%
(6%)
Next 12 month stock development (KMT)
Note: Stock positions are calculated based on estimates of monthly production, consumption, import and export volume, using trade statistics over the last twelve months.
1) Last twelve months export figures as per Sep-18.
Source: Nedspice Research, ITC.
Sto
ck d
evelo
pm
ent
30 35 32 29 26 24 22 21 19 17 15 21
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
Oth
er
consid
era
tions
+
‒
+
30
63
33
Stock Sep-18
Consumption
Import / Export +18.5%1
5 6
10 10
12
20
24
(10%)
10%
30%
50%
70%
90%
(3)
2
7
12
17
22
27
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
19
Note: Based on 2018 production estimates.
Source: Nedspice research.
Cambodia
Cambodia vs RoW Black vs White Production over time (KMT)
Production per key area
L3Y Avg.:
14%
4% 100%
Tboung Khmum
71%
Ratanakiri 7%
Kampot 1%
Others 21%
20
Cambodia is set to continue its strong growth for now with an expected crop of 30 KMT, but planted areas start shrinking
Production over time (KMT)
+23%
Next 12 month stock development (KMT)
Note: Stock positions are calculated based on estimates of monthly production, consumption, import and export volume, using trade statistics over the last twelve months.
1) Last twelve months export figures as per Sep-18.
Source: Nedspice Research, ITC.
Oth
er
consid
era
tions
+
‒
‒
3
1
25
Stock Sep-18
Consumption
Import /Export
+8.7%1
Harv
est cale
ndar
– – 1 2 3
10 10
2 1 0 – –
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-1
9
Aug-1
9
Sto
ck d
evelo
pm
ent
3 2 2 4 6 15
23 21 18 13 10 7
Sep-1
8
Oct-
18
No
v-1
8
De
c-1
8
Jan-1
9
Feb
-19
Ma
r-1
9
Apr-
19
Ma
y-1
9
Jun-1
9
Jul-
19
Aug-1
9
30
5 6
10 10
12
20
24
(10%)
10%
30%
50%
70%
90%
(3)
2
7
12
17
22
27
2012 2013 2014 2015 2016 2017 2018 2019
Production
Change in planted area (%)
L3Y Avg.:
3%
218 273
92
60
82 91
67
60 35
33 24 30
394
455 448
531
575
612
2014 2015 2016 2017 2018 2019
21
Global pepper production (KMT)
21
Exportable production1 (KMT)
1) Excludes imports and exports between producing countries.
Source: Nedspice research.
Black 81%
White 19%
Vietnam
India
Brazil
Indonesia
ChinaCambodia
Others
+37KMT
Total production is expected to increase with 37 KMT to a total of 612 KMT
211
266
30
(4)
74
84
56
49
(25)(30)
23
29
232
288 277
355
392
424
2014 2015 2016 2017 2018 2019
63 64
60 63
11 11
9 9
40 40 157
162167
172177
182188
2013 2014 2015 2016 2017 2018 2019
Ind
ia
Chin
aO
the
rs
22
Producing countries (KMT) – 40% total
22
Consuming countries (KMT) – 60% total
Source: Nedspice research.
Versus exportable
production of 424 KMT19%
15%
9%
7%6%5%
13%
13%
2%
11%
Total demand
474KMT
Annual demand growth
c. 2.6% p.a.
c. 12 KMT p.a.
Annual production growth
37 KMT
Total production
612 KMT
Malaysia
Indonesia
87 89
70 72
41 42
33 34
25 26
23 23
249 255
261 267
273 280
286
2013 2014 2015 2016 2017 2018 2019E
uro
pe
Nort
h A
meri
ca
Others
Global demand is at some 474 KMT, which remains well below production levels
Asia
Africa
M.East
74
125 151
203
258 299
73
50 33
62
121
218
148
175 185
266
379
517
2014 2015 2016 2017 2018 2019
0
2,000
4,000
6,000
8,000
10,000
12,000
0
100
200
300
400
500
600
700
198
4
198
6
198
8
199
0
199
2
199
4
199
6
199
8
200
0
200
2
200
4
200
6
200
8
201
0
201
2
201
4
201
6
201
8
US
$ / M
TKM
T
Production
Consumption
Black Pepper FOB
23
Global stock development (KMT)
23
Planting estimates suggest supply will continue to outgrow demand
Historically, there is a c. 3-6 years reversal period
% C
hange in p
lante
d a
rea
1‘14-’19 CAGR
Producing countries 32.0%
Consuming countries 24.3%
Total 28.4%
Note: Market data as per 15-Oct-18.
1) Weighted average of estimated increase in Vietnam, India, Brazil, Indonesia and Cambodia planted area. The production quantities of the previous year are used as weight.
2) Average of Vietnam, Indonesia and Brazil ASTA quality.
Source: Nedspice research.
2
Global stocks are increasing, and it’s likely that supply will continue to exceed demand
11% 9%
18%
6%
3%
0%
2014 2015 2016 2017 2018 2019
Vines generally enter most
productive state in year 5 (2020)
–
20%
40%
60%
80%
100%
120%
140%
160%
180%
0
50
100
150
200
250
300
350
400
450
500
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Sto
ck ra
tio (%
)1
KM
T
Stock Demand Stock ratio
–
20%
40%
60%
80%
100%
120%
140%
160%
180%
0
50
100
150
200
250
300
350
400
450
500
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Sto
ck
ratio
(%)1
KM
T
Stock Demand Stock ratio
0
2,000
4,000
6,000
8,000
10,000
12,000
–
20%
40%
60%
80%
100%
120%
140%
160%
180%
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
US
$ / M
T
Sto
ck
ra
tio
(%
)1
Stock ratio Black Pepper FOB
2424
1) Defined as global stock position / global demand.
Source: Nedspice research.
Excess production is pushing the ratio of global stocks relative to demand beyond the previous high…
1
0
2,000
4,000
6,000
8,000
10,000
12,000
–
20%
40%
60%
80%
100%
120%
140%
160%
180%
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
US
$ / M
TS
tock r
atio
(%
)1
Stock ratio Black Pepper FOB
2525
Note: Market data as per 15-Oct-18.
1) Defined as global stock position / global demand.
2) Average of Vietnam, Indonesia and Brazil ASTA quality.
Source: Nedspice research.
2
Current price
US$2,708/MT
…and price bottoms tend to occur around stock ratio highs
US$1,108/MT US$1,454/MT
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1983 1985 1987 1989 1991 1993 1995 1997 1999 2002 2004 2006 2008 2010 2012 2014 2016 2018
US
$ /
MT
Black Pepper FOB White Pepper DW FOB
3.3 years
2626
Note: Monthly price data as per 15-Oct-18.
1) Average of Vietnam, Indonesia and Brazil ASTA quality.
Source: Nedspice research.
1
Historical data suggests we have seen the largest part of the price drop, although it may take more time before reversal sets in
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1988 1988 1989 1990 1991 1992
US
$ /
MT
4.9 years
(67)% price
decrease in
3.3 years
(44%)
price decrease
82% of the
total drop
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1999 2000 2002 2003 2004 2005
US
$ /
MT
5.7 years
(70)% price
decrease in
3.3 years
(21)%
price decrease
92% of the
total drop
1
27
─ Planting of new pepper vines stagnated around the world as prices dropped, however production is still
expected to increase to 612 KMT (+37 KMT), driven by Vietnam and Brazil.
─ Growth in demand remains resilient at c. 2.6% p.a. (~12 KMT+), however at a total of 474 KMT it is well
below production levels.
─ The excess production will cause global stocks to increase further and it will likely take some time before
supply lines up with demand again, resulting in continuous downward price pressure.
─ Also historical data suggests that we may see a further decrease of prices over the next years.
─ Prices are already close to or below production costs in many countries, so the struggle for farmers who
concentrate on pepper may harden.
Concluding summary
28
Thank you