The last stand

Pepper cultivation is on a never-before decline in Kerala, the land of its origin. Are we witnessing the end of a region's historic role?

in Kochi and Idukki

Change has come on such quiet feet that it startles you at every turn on the scenic pepper routes from Idukki to the terminal markets on the spice coasts of Kerala.

Dreams built on pepper fortunes no longer seem to turn real in Idukki, the most important centre of its cultivation in India, as elsewhere in the State. Along with some other monsoon-drenched districts such as Wayanad in the north, central Kerala, including parts of Idukki, used to produce such copious quantities of the black beads that it never failed to astonish the ancient traders who came in search of its mysteries.

Black pepper is indigenous to Kerala, known better in a historical context as the Malabar Coast, and its plentiful supply here had for long been kept a secret to the outside world by the seafaring traders insecure about everlasting profits. Of all the spices of the East, pepper was much in demand in the old world because its origins remained a mystery and the transfer of the produce across the shores an enormous chore.

In Europe of yore, the land of severe winters where pepper refused to grow and where starvation was common, it was valued as a food preservative and flavouring agent. Pepper set off several voyages of exploration seeking to find its source and control its supply, and these led to the discovery of a sea route to India from Europe and changed the course of history in many parts of the world. No other commodity was perhaps so romanticised in the ancient world.

Throughout history, its production and trade was sought to be monopolised by various players. In its own homeland, pepper wealth was often used to great advantage by erstwhile rulers, among them the Zamorin of Calicut, whose kingdom Vasco da Gama sailed into in 1498, and Marthanda Varma, the founder of Travancore, during whose rule the first pepper monopoly was established in 1743.

State control over the trade in pepper lasted for more than a century and made the rulers of Travancore the sole distributor of pepper to a variety of European powers. It ensured a kind of forced cultivation of the crop for state revenue, weapons and control over the principalities. It saw the growth of a well-connected trade network, from the hills to the coasts, along rivers and across backwaters. Huge pepper godowns were built on the banks of rivers, near estuaries and ports, which ensured controlled supply of spices to the trade ships visiting the coast.

But not all of Malabars pepper reached the eager traders who came across the ocean blue. It also went, at times surreptitiously, without their knowledge, across the Western Ghats, to the rest of India, where, too, pepper was in great demand.

Surely, all this history is anchored on a singular fact: the abundance of black pepper in Kerala.

Declining production

In spite of the prodigious demand for pepper, its cultivation, curiously, was for a long time confined mostly to the accessible lowland and midland regions of Kerala. An important centre, for example, until the turn of the century was the present-day rubber growing areas of central Kerala, where pepper was earlier the major crop. The hills of the Western Ghats, especially, were left largely unmolested until about half a century ago. But by the late 1960s, the present-day boom towns in Idukki district, from Kumily to Thodupuzha on either side of the Idukki reservoir, were already full of pepper enclaves where ambitious settlers began their hard struggle with nature and their tryst with the crop.

Among them was T.T. Thomas, now 71, a settler farmer in the remote forest village of Kanchiyar near Kattappana, an important primary market centre for pepper in Kerala (see life story). Life was hard then, but we used to get nearly 18 quintals [1,800 kg] of pepper from an acre [0.4 hectare]. Today, most farmers would be lucky if they get at least 10 kg, he said.

Production has dropped throughout Kerala because of terrible infestations in ageing pepper gardens, changes in weather patterns, unfriendly market conditions, and a frantic shift to more remunerative crops by growers, A. Jayatilak, Chairman of the Spices Board, told Frontline.

Farms and plantations across Kerala are unable to contain diseases affecting pepper, such as foot rot (quick wilt) caused by certain fungi (Phtyophthora), slow wilt (slow decline) caused by parasitic nematodes, Pollu disease (Anthracnose) again caused by some pathogenic fungi, and some viral diseases. Moreover, the monsoon pattern has been fluctuating wildly. Farmers say that the comparatively warmer regions of Kerala are increasingly becoming unsuitable for pepper.

In the hill tracts near Kattappana overlooking the beautiful Cumbum valley in Tamil Nadu, the havoc on pepper cultivation caused by these factors is quite evident. Alex, a pepper grower, explains the farmers woes thus: Last year there were continuous spells of rain for seven to twelve days, and it was cold, which was ideal for the Pollu disease [a fungal disease that causes spikes to fall at the time of maturity] to spread. This year, when the pepper berries began to sprout and the plants needed regular spells of rain, the monsoon failed us. My two-acre crop, some of which would otherwise have had individual pepper strings at least one and a quarter feet in length, is therefore as good as lost. When this cruel cycle repeats itself, a farmer loses all hope.

Pepper is a fragile plant, especially when it is young, and requires great care, being quite vulnerable to variations in the weather. It needs rain, scattered and at specific intervals, and sun and warmth, in almost the same measure. If needed, the cultivators have to spend much time watering the plants during the summer and draining out the water during the monsoons. And, there is no yield from the plant for the first three years, or more, when the crop is most vulnerable and is usually ravaged by severe ailments.

After the vines are planted and the farmer nurtures them for three years, suddenly, when they are expected to start flowering, they wither away. It is exasperating and demotivates the farmer, and he is not willing to cultivate pepper any longer, said P.S. Sreekantan Thampi, Deputy Director, Spices Board.

With labour costs going up to Rs.400/Rs.500 a day, the majority of farmers are shifting to cardamom, which starts to yield from the first year and is more profitable. An acre of cardamom would give up to 1,000 kg of it and 1 kg will fetch you Rs.600 to Rs.700 this year. But an acre of pepper hardly gives you 10 kg or so in most farms [at a price of below Rs.400 a kg], Thomas said.

A study conducted by Kerala Agricultural University in 2010 found that there was a nearly 24 per cent depletion in the area under pepper cultivation in the State (from 2.02 lakh hectares to 1.54 lakh hectares) between 2001 and 2009. Production went down from 60,000 tonnes to 42,000 tonnes, a decline of 44.21 per cent. Productivity per hectare dropped from 301 kg to 221 kg during the same period. Farmers say more areas have gone out of pepper cultivation in the two years that followed.

The transformation is shocking because the yearly harvests from smallholder farms in Idukki and Wayanad districts accounted for a major chunk of independent Indias pepper production even a decade ago. Farmers say that the coming years will see a severe fall in production.

Effect on primary markets

Nowhere are the effects of this change more evident than in the primary market towns in Idukki. Most middle-level traders, who used to stay open well past midnight as trucks were loaded, are now pulling down their shutters by six in the evening. From the small procurement shops where the neighbourhood farmers regularly sell their produce, to dealers in bigger markets such as Kattappana and Kumily, cold, cemented shop floors lie empty, with only tiny mounds of pepper dumped in corners.

Early this year, when the price of pepper rose to a record Rs.400-plus level, there was a rush among farmers and traders to sell all their stock, unusual in Kerala where people traditionally tend to hoard the commodity, just like gold, as a store of value for use during hard times.

When the price of pepper rose, we all sold our stocks. There is nothing left. Every day, tonnes of pepper used to be sent from Kattappana, nearby, to Kochi and other big markets. But now it has come down to a load (nearly 10 tonnes) a week or so. Even small traders used to procure up to two tonnes of pepper daily during the harvesting months from January to February, and a minimum of 200-250 kg a day during off-season months like September. This year it was bad. In 100 days I havent got even 1 kg of pepper from the farmers, said Biju Thomas, a first-post procurement dealer at Irupathekkar, near Idukkis main pepper market at Kattappana.

Middle men and markets

Idukki produces one of the finest varieties of pepper in the world, and even a casual drive through the winding roads in the district used to offer pleasant sights of robust vines clinging on majestically to every tree or trellis in sight. But a visitor making the trip today will not find a single flourishing small-holder pepper garden easily. The change, which started happening from the mid-1990s, has become very much evident at present.

In most places, even on the roadsides, pepper has given way on a massive scale to cardamom; or it is grown without much care among a multiple other crops. It is ironic that at a time when end-users, including processing firms, exporters and international spice companies, are increasingly trying to cut out intermediaries and buy pepper directly from source markets, its cultivation is declining in the land of its origin.

Cutting out middlemen is good for the big buyers, but most traders still go on the defensive when they answer the question: how much will the farmer get for his produce? If today the Kochi price is Rs.388 for a kg of pepper, I can only buy from the farmer at a price that is below Rs.384 because what I get from the dealer at the next stage will be only Rs.384 a kg, Biju Thomas said. Indeed, the pepper cultivators of Kerala, the majority of them with holdings of less than a hectare, still prefer to sell only to neighbourhood traders and have largely delinked themselves from the world of big traders and powerful purchasers. Some sell their harvest in advance to contractors, among them, reportedly, agents of big spice companies.

However, farmers are now well aware of the price of pepper at various markets and of the daily price swings through online traders. This is an important change in the primary markets, where, earlier, it took more than a day for even the price of pepper in the Kochi market to be widely known.

There is a new animal in the pepper marketthe national commodity exchanges, where people unrelated to the trade play their games like they do in the stock exchanges and speculate on future pepper prices. The volume of trade is increasing as a result, but it is also causing wild fluctuations in the market. For example, on some days, prices can be down until about 4.30 in the evening, and then it shoots up all of a sudden by the time the market closes. This happens without any tangible reason, and many people who actually deal with the commodity are taken by surprise and have lost a lot of money. But, you could also gain from it equally, at times, if you are lucky, said Biju C. Kuruvila, a second-generation primary market dealer at Kattappana.

Clearly, the big purchasers are now in the primary markets and in the national commodity exchanges seeking cheaper pepper, than, for example, what has been available from historical times at terminal markets such as Kochi.

By the same logic, they have been seeking pepper at lower prices in other countries as well. Companies like ours will import from wherever it is cheap because we are into this value addition business. For our customers, it is ground black pepper, cleaned, processed and value-added in tune with international quality standardsit is not origin specific, Jojan Malayil, CEO of the Kochi-based spice company Bafna Enterprises, told Frontline.

Competition, at home and abroad

Until the late 1980s, India (and within it Kerala) was a big player in the world pepper market. But gradually, within a decade of first venturing into pepper cultivation, Vietnam became a huge player in the global market. Vietnam today generates nearly 1.5 lakh tonnes a year, very little of which is used for its domestic consumption. Similarly, pepper produced by comparatively late entrants such as Sri Lanka, and also traditional producers such as Indonesia and Brazil, is giving strong competition to Indian pepper on the world stage. Indian pepper production has come down from nearly 80,000 tonnes to about 40,000 tonnes during the same period.

The realisation that Vietnam, and not their own State, is the new pepper factory is yet to sink in among growers in Kerala. Perhaps, more galling for Kerala pepper growers is the fact that just across the State border, in the neighbouring regions of Karnataka, pepper cultivation is flourishing, while they face disastrous circumstances. Many farmers and officials believe the production of pepper in Karnataka is set to overtake that in Kerala very soon. The reasons for better production are similar in both Vietnam and Karnataka: pepper is grown in fresh soil, unlike in the degraded, disease-prone farms in Kerala; disease-tolerant varieties are used for planting; and there is a lot of stress on achieving economies of scale through plantation-type cultivation.

Nearly 75 per cent of the pepper cultivation in Kerala is in small and medium-sized holdings that are less than a hectare, whereas in Karnataka pepper is grown by large corporate houses, in huge coffee plantations and areca nut gardens. Similarly, in Vietnam, pepper is raised as a mono-crop, in vast areas, and gets more care and attention from the growers, as against the small-holder, careless, multi-crop pattern in Kerala.

Vietnam is a big threat to India. We are totally lost there. They have vast areas under pepper, their production and productivity are high and they keep their prices low, said Kishor Shamji Kuruwa, owner of Kishor Spices Company, a traditional spice business house in Kochi.

Not just a game of demand and supply

The high price of Indian pepper is what gives farmers in Idukki and Wayanad some consolation in an otherwise bleak background of dropping production. Pepper prices rose to a record Rs.400-plus a kg early this year. However, not everyone is happy.

Bhavesh Vijaysingh is one of the few surviving spice brokers in Jew Town, Mattancherry, a dying pepper trading enclave in Kochi that once had a concentration of his breed. He feels strongly about the helplessness of the traditional players and about the dramatic way the trade is being hijacked by market players with money power.

With the coming of the national commodity exchanges in 2002 and the central and private warehouses, the ways of the pepper business have transformed. Kochi had the first exclusive pepper exchange in India [established by the Indian Pepper and Spice Traders Association, IPSTA], and it was run by the people who were in the trade, who would not do anything that would harm it. The exchange was well regulated by the traditional players here, without any default [on supply or delivery of the commodity] and without much volatility. But today, volatility within a day itself is in the range of Rs.10 to Rs.15, he said.

According to him, prices are no longer linked to the demand and supply of pepper, but to money power: People in the trade are not happy about what is happening, even though we get good business. The changes are not healthy. The trade is concentrating in the hands of a few, and most of the traditional players are being wiped out.

But what exactly is pushing up the price of Indian pepper? Jojan Malayil, whose company has processing and export businesses in India and Vietnam, said: Production has come down. The monsoon was delayed, and speculation pushed up the price. But Indian prices are very high. The speculators have now become very powerful and Indian prices close at Rs.75 to Rs.90 higher than the international market. Therefore, India is strongly out of the league, and today there is hardly any pepper export from the country.

According to Kishor Shamji, with the government actively encouraging people to participate in the national commodity exchanges, very big operators, even cartels of operators, have joined the game and their interest in it had pushed up the prices of some other commodities earlier. Since last December, these big cartels of commodity operating groups are into pepper. In June, July and August they cornered large quantities of the commodity and are holding back. They are anticipating that since there is not much pepper, the prices will go further up to about Rs.500 a kg. [Now it is between Rs.375 and Rs.400 a kg.] So they are holding their stocks.

But are the farmers not happy that the prices are up and they are getting good returns? The trouble is, it can go the other way too. Once they find that there is more production, they can push down the price, he said.

Thus, whether they understand the new market realities or not, more and more pepper farmers are being exposed to the vagaries of the commodity markets and intense international competition. We are now seeing a marked change in the buying and selling patterns of pepper. No trader or exporter is buying more pepper than he needs at a time. Similarly, farmers have become more cautious. Now he sells when the prices are high, and only when he needs the money. The buyer also buys only when it is needed. Nobody wants to create big inventories.

Changes in the terminal market

The way the pepper business and its priorities are evolving is best illustrated by the changes in the terminal market in Kochi in the past two decades.

Right in the middle of Mattancherry, on Jew Street, Kochis traditional spice centre, is Indias first and only international Pepper Exchange, a nondescript building into which the visiting Queen of England once walked in to get a sense of the bustle and din of the open outcry system of pepper trading. The bustle is long gone. Parts of the building have been rented out; the remaining halls are empty, except for a few online traders.

The exchange is run by the IPSTA, but its members can now do their trading from anywhere. The volume of trade is only 10 tonnes to 15 tonnes a day, whereas it is 5,000 to 6,000 tonnes in the national commodity exchanges, said Kishor Shamji, who is also a former president of IPSTA. The commission agencies in Jew Town and nearby areas, who used to finance the chain of pepper traders in the pre-liberalisation era, have all disappeared or altered their profiles. Their presence now is restricted mostly to the ginger trade. Out of nearly 70 spice export firms, only a handful are still functioning at Mattancherry, to date the main centre for procurement, processing and export of pepper, ginger and other spices, and coir. The huge warehouses on the waterfront, where pepper arriving in boats and barges used to be unloaded and stored, have all been re-engineered as marts selling huge antiques and handicrafts.

Such changes are not directly linked to the decline of pepper production in Kerala, but, strangely, to an expansion of business opportunities in pepper (and in all spices), especially in the export market. Big business has adapted quite deftly to the reality of declining production by turning away from bulk pepper exports and concentrating more on extraction, processing and export of value-added pepper. It offers them better economies of scale, whether it be with regard to storage space, shelf life, price or volume, Sreekantan Thampi said.

By changing their focus to the production of value-added pepper products, the companies have also reduced their dependence on the supply of pepper from within Kerala. They can now source it from wherever it is plentiful and cheap, Vietnam, for instance.

Today, therefore, even as the once famous Malabar Coast is fast turning out to be quite a marginal player in bulk pepper trade, 90 per cent of the worlds spice extraction units are located in India, out of which 75 per cent are located within the State itself, mostly in Ernakulam district. Eighty per cent of the world market share for oleoresin, spice extract and spice oil is accounted for by companies now in Kerala.

India has a huge domestic demand for pepper. It remains the worlds largest consumer of the commodity, with domestic consumption estimated at 40,000 tonnes a year. With pepper output falling almost by half, right now India is generating only just about enough pepper to meet its own internal demand. This shift in the destination of pepper produced from within is also significant, because a major share of the pepper produced in Kerala was earlier exported to other countries.

We dont have enough production to depend on here, for example to make pepper powder or oil. So we import from a low tariff area, a low cost area, we process it and export at a bargain. Sometimes we may not be able to compete in the international market with our products. So we buy from Vietnam at less than the Indian price and re-export it after value addition, said Jojan, whose company has now established a presence in Vietnam too.

In recent months, Indian pepper has been thoroughly outpriced in the international markets. So who will buy our pepper at a higher price? The world over, people are looking for the cheapest available source of the commodity, Kishor Shamji said.

No doubt, lax pollution control laws and comparatively cheaper labour costs are also among the main reasons why there is such a concentration of spice extraction units in Kerala. Such units have become a difficult proposition in European countries and the United States because of the norms for controlling pollution. There are strict requirements for destroying the residue from solvent extraction units there. The laws are very liberal here, Kishor Shamji said.

To take advantage of such a tolerant scene, perhaps, and to reach out to the source markets, several multinational companies also have been establishing themselves in Kerala through joint ventures or buying out shares from existing companies to launch subsidiaries here. Among them are U.S.-based McCormick, the worlds largest spice firm, which has a well-established joint venture with AVT (called AVT-McCormick); Netherlands-based Ned Spices; and Singapore-based Olam. Such companies have invested heavily in India, and their main target has mostly been the traditional family-owned spice export firms operating in Kerala.

According to the reports of the International Pepper Community (IPC), Indian production is projected to decline by 5,000 tonnes to 43,000 tonnes in 2012. With trends so bleak for pepper cultivation in Kerala, the National Horticultural Mission had launched a special package for the rejuvenation of pepper in Idukki and Wayanad districts. The Rs.120-crore project implemented in Idukki through the Spices Board aims at replacing old, senile or disease-affected pepper vines with disease-tolerant, high-yielding varieties.

The project has crossed its third year, but there is much scepticism in the farming community about its prospects. Thomas, for example, said that farmers had mainly made use of the opportunity to plant new vines on a big scale with the aim of getting the subsidy of Rs.28 for every vine that came with it. It is doubtful whether they have subsequently taken care of the plants.

There is a clear trend both in Idukki and Wayanad not to depend on pepper as a mono-crop or to replace pepper with cardamom. Moreover, in almost all farmer households, the new generation is moving away from agriculture. As a result, most smallholders are forced to depend on labourers and often sell the entire harvest in advance to contractors.

The care that used to go into the cultivation of pepper is lost and, despite the rejuvenation project, at the end of five years, if my guess is right, pepper production is going to be lower than what it is today. If pepper is to survive in Kerala, new disease-resistant varieties and good care throughout the year for the plants are essential. That is the bottom line. The new-generation farmers cannot really be bothered about Keralas glorious history in pepper production or trade. Farmers go where the money is. They switch over to more remunerative crops or they quit farming altogether and seek other avenues, Thomas told Frontline.

Consequently, the famed Malabar Coast has already become a marginal player in the global black pepper market. Instead, it is fast turning out to be a huge centre for back-end operations of big spice companies.

With the pepper processing industry growing in sophistication, there also is a significant consolidation of the trade in the hands of the most powerful players and marginalisation of a lot of traditional and smaller players. Cheaper pepper supplies available from Vietnam and other nations and the entry of retail giants and spice multinationals have transformed the game altogether and is driving out smaller traders and exporters.

The big purchasers may have come in initially to get their hands on the source markets for obvious price benefits as well as for ensuring quality and food safety norms, which have become a premium requirement in American and European home markets.

But now they seem to have turned their attention to value-added products and are increasingly looking at the huge Indian domestic market to sell them. They have established joint ventures or subsidiaries in several other pepper-producing countries too.

We need to be cautious that uncontrolled imports or interference of these big players in the market does not adversely affect Indian farmers, traders and export companies. Many of these big multinationals are now a direct threat to Indian companies in the value-added spice products sector too. And it is the huge Indian domestic market that is increasingly becoming a major attraction for them, Kishor Shamji said.

The most famous story about Keralas pepper wealth and trade is the one about Vasco da Gama asking the Zamorin of Calicut for a few pepper vines for replanting in his own country. As his courtiers remained alarmed, or so the story goes, the supremely confident Zamorin asked da Gama: You can take our pepper but can you take our monsoons?

Certainly, in the ancient world, among the long-held secrets of the pepper trade had been the inevitability of the twin monsoons and the tropical climate in Kerala for its cultivation, and the ways in which the local traders ensured control over its supply.

Today, however, the climate is changing fast, the mysteries of the trade are long gone, the supply-chain is being snatched away by multinationals and big retailers, and pepper has long ceased to be a store of value or an exclusive prize to be had in the Kerala coast.

The most surprising part of this tale of decline and perhaps the end of the regions historic role is the sense of resignation about it that pervades in the pepper tracts of Idukki and the rest of the Malabar Coast.