Spice suppliers and food manufacturers are facing a dramatic increase in the price of two key ingredients as the prices of black pepper and powdered ginger soar in response to bad weather in India and increased demand from China.

The price of Indian black pepper has risen by 42% since mid-April - from £4,993/tonne to £7,076/tonne - because of a 30% drop in production, from 50,000 to 35,000 tonnes [Mintec], caused by bad weather. Supplies are also coming under pressure from Indian farmers switching to more profitable crops, such as rubber.

India is the world’s fourth largest black pepper producer behind Vietnam, Indonesia and Brazil and is expected to become a net importer of pepper in 2014, adding further pressure to already high global demand.

Prices are also rising in Vietnam as the crop there is smaller than previously forecast. “Since the start of the year, pepper prices have increased significantly,” said Mintec analyst Corrina Savage. “It is unlikely for them to increase further given the very high level of pricing in the market, but they are likely to remain high.”

The situation is similarly charged in India’s ginger market. Prices jumped by 30% in the 12 months to January 2014, and then rose by a further 92% between January and May, increasing from £1,807/tonne to £3,477/tonne.

The spike is partly due to the unfavourable weather that has also affected black pepper production, and has been exacerbated by increased demand from China.

“There has been high domestic demand in China, and with producers now able to get high prices locally, they are exporting less, putting additional pressure on other global producers such as India,” said Savage. “I presume that prices will remain high but are unlikely to increase further.”

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