Hustling to Grow Pepper Plants

The Ministry of Agriculture and Rural Development said Vietnam exported 15,000 tonnes of black pepper worth US$103 million in September 2011, raking in US$663 million from shipping 115,000 tonnes abroad in the first nine months, up more than two fold in value and just 17.4 percent in volume over the same period of 2010. The country is forecast to earn more than US$800 million from black pepper export this year.

 

Supply has shrunk while the demand keeps rising. Vietnam’s export value to the United States, Egypt and Pakistan increased more than two times, while growth seen in pepper export to Spain and Singapore jumped more than three times. Pepper export prices have escalated since the start of this year. In the first eight month, prices averaged at US$5,615 per tonne, an increase of nearly 69 percent year on year.

 

Mr Nguyen Viet Chien, Director of the Centre for Statistics and Analysis under the Ministry of Agriculture and Rural Development, said that despite concerns about slowing consumption, the short supply continues pushing up black pepper prices on international markets. The price of Asta pepper stays at US$8,000 a tonne in the Indian market, US$7,500 - 7,700 a tonne (FOB) in Brazil, US$8,200 a tonne in Indonesia, and US$8,300 a tonne in Vietnam. Prices of white pepper from India and Vietnam are staying at US$11,650 and US$10,675 - 10,700 a tonne, respectively.

 

For the time being, there are no clear signs that pepper prices will fall, because even low quality pepper is being sold very well. Demand for high quality pepper is very strong, and even the supply of lower quality pepper is shrinking in Vietnam.

 

Mr Do Ha Nam, President of Vietnam Pepper Association, said: Prices of black pepper have never risen as high as now. In 2009, the price of fresh pepper was VND40,000 (US$2) per kilo at the field and farmers enjoyed a profit margin of 50 percent. In 2010, the price reached VND80,000 a kilo. In March 2011 when the pepper harvest started, the prices still escalated to VND120,000 a kilo and tended to go up further. On September 14, the price set a record of VND145,000 a kilo in Ba Ria - Vung Tau province. At present, the price is in new territory, around VND155,000 a kilo. Thus, within just two months, the prices have risen 25 percent.

 

The global price trend from now till December 2011 will largely depend on inventories in India and Vietnam, and new harvests in Vietnam and Brazil. In 2010, Vietnam’s black pepper output reached 120,000 tonnes and inventories were negligible. After three first quarters of 2011, it exported 115,000 tonnes and the stockpiled volume was just some 5,000 tonnes for the last three months. For that reason, the supply will become more intense towards the end of this year. Many foreign traders are flocking to Vietnam to seek supply sources. The world demand is increasing but the supply declines. As major producers have made uncertain forecasts for new harvests, prices in the last months of the year are hard to predict.

 

Despite all the recommendations from local authorities, farmers in Gia Lai and Dak Lak provinces have invested massively in planting black pepper plants because of high prices. The Department of Agriculture and Rural Development of Gia Lai province said pepper acreage has grown more than 6,000 ha. In Dak Lak, the area has been enlarged by 1,200 ha from the start of June 2011, totalling 6,000 ha. Meanwhile, according to the sustainable pepper development plan of Dak Lak province, the pepper acreage is expected to keep stable at only 4,900 ha from now to 2015 with an annual output of 14,715 tonnes or more. Black pepper plants will be grown only in suitable soil.

 

To increase the pepper growing area, many farmers have used their gardens or unsuitable soil which is only good for maize or beans. Many are even replacing their productive coffee farms with pepper plants. To build frames for pepper plants, many forest trees have been felled.

 

Without sufficient knowledge, many farmers are seeing their pepper plants dying because they are planted in unsuitable soil.

 

If the Dak Lak agricultural sector has no measures to curb the ‘whirlwind’ pepper spread, the total pepper acreage in the province will reach 10,000 ha in only a few years to come, becoming the biggest pepper producer by area.

 

Vietnam now holds 40 percent of the world’s pepper market share. To retain its position as the leading pepper exporter, the Ministry of Agriculture and Rural Development and the Vietnam Pepper Association favour keeping 50,000 ha of pepper farms and enhancing value by downstream processing. But, the enthusiasm of farmers for this crop in the past year is ruining this objective.

 

Although the global black pepper supply is forecast to fall short by 33 million bags in the last three months of this year, the broken general development plan will weaken the position of Vietnam on the international arena. The first to be hurt at that time will be farmers. Besides, the exportation of many other crops like coffee and rubber will be affected.