Markets & Prices

Last updated: Friday, February 15, 2019


Pepper Prices Cornered?

Posted: Tuesday, August 22, 2017

There are signs that foreign pepper traders are manipulating the market in Vietnam, many mass media agencies quoted the website of the Vietnam Pepper Association (VPA) as saying.

VPA voices
VPA said, pepper prices in the country have become abnormally volatile since the end of July. On July 28, 2017, pepper prices unexpectedly jumped from VND80,000 per kilo to VND86,000 in the morning but suddenly dropped to VND82,000. Prices are still very fluctuant.

Some VPA member companies reported with evidence that a group of Chinese traders are controlling the Vietnamese pepper market these days. Chinese traders are coming to pepper exporters to place orders on pepper purchases. Unusually, they accept any prices quoted by the exporters. After that, they hire hotels near the exporters and come every day to urge them for contract fulfilment. Traditionally, after three days after signing the contract, they must transfer deposits but they fail to do so, citing the delay comes from banks. And, they insist on buying the pepper.

At the same time, knowing that the exporters must be in a rush to purchase pepper from suppliers to fulfil their contracts signed with Chinese traders. But, Chinese vendors at the same time quickly disperse to pepper growing areas to buy and pledge to sell to agents (at lower prices than the market at the time). Seeing attractive profits, these agents agree to buy the crop immediately to resell to the exporters. But, Chinese companies only sell a very small portion at lower prices in a very short time and then they complain that they have no pepper in stock, causing the scarcity in the midst of high demand. After that, they sell pepper to agents at high prices. Under the time pressure of deals signed between agents with exporters and exporters with Chinese traders, pepper will be sold to the market at a target price Chinese traders want.

Currently, Vietnamese exporters cannot connect Chinese vendors on the telephone due to unknown reasons. VPA warned that this method is not new but it is hurting local exporters more seriously. Vietnamese exporters are busy fulfilling contracts (big enough to persuade them to sign) with Chinese firms and unable to export their products to other markets. Unfortunately, Chinese traders breach their deals, causing Vietnamese exporters to suffer sales damage, distrust and loss of business opportunities with importers in other traditional markets.

Additionally, foreign companies are manipulating the market by causing rapid price fluctuations to make domestic buyers hesitant to increase their stocks, thus affecting deals signed between suppliers and exporters. Foreign firms will gain hefty benefits from intentional price manipulations and cause damage to farmers and the Vietnamese pepper industry because trading does not follow market rules. VPA warned local businesses to be cautious in making deals with pepper traders.

Authoritative intervention
The Ministry of Industry and Trade recently announced that there is not enough evidence to conclude that foreign traders are manipulating the pepper market in Vietnam. However, the ministry will coordinate with local Departments of Industry and Trade to keep a close watch to ensure a healthy, fair and lawful business environment for pepper in particular and agricultural products in general.

The ministry asked VPA to provide a list of businesses affected by risks in dealing with foreign traders. However, in Document 38/HTVN-CV dated August 10, 2017 sent to the Ministry of Industry and Trade, VPA stated that “it has no resources and, cannot make a specific list of affected enterprises and cannot clearly define the concept of being affected to compile statistical data, let alone terms and conditions of business deals regulating the confidentiality of contract information details.

Also according to VPA’s document, the above information is on its ‘internal’ website, which carries the significance of ‘warning and sharing among VPA members together’, thus helping them support each other to reduce business risks. VPA expressed its gratitude to State agencies for their care but expected to ‘stop the case’ and ‘it will send the official document for State support and intervention when things get worse and Vietnamese businesses find it necessary.’
Reports from the Departments of Industry and Trade in pepper-growing provinces showed that no cases of foreign manipulation of pepper prices have been found as reported by some media.

Huong Ly

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