Pepper Export: Volume up, Earnings down

Pepper Export: Volume up, Earnings down

Vietnam has become the world's leading black pepper exporter, shipping around 100,000 tonnes of the products while earning US$134 million last year. The export volume was three times higher than that in 2000, however, earnings decreased by nearly US$12,000.

According to the International Pepper Council (IPC), since 2002, pepper supply has exceeded demand in the world market. In 2004 only, total world’s pepper output reached up around 321,000 tonnes, plus 60,000 tonnes of stockpiled volumes, bringing the total supply of the product to 380,000 tonnes. Meanwhile, the world’s total demand for the agricultural product stood at only 200,000 tonnes last year.

IPC warned that if their member countries continue to expand areas of cultivating pepper, the sector would fall into a pepper-redundant crisis, which had previously happened to the coffee industry.

Currently, 95 per cent of pepper produced in Vietnam is for export, meaning that the sector depends heavily on the world market. Vietnam is not a member of the IPC.

Previously, the Ministry of Agriculture & Rural Development recommended that farmers don’t plant pepper trees if the price of pepper fell below VND15,000 per kilogram. However, few farmers can calculate costs of the product in advance.

The world’s demand for pepper rises slightly by around 3 per cent annually while outputs of the product increase by up to 10 per cent. In Vietnam only, over the past five years, areas for cultivating pepper surged from 15,000 hectares to 52,000 hectares (as at the end of 2004).

The strong growth in area of planting pepper was attributed to the spontaneous cultivation of local farmers. During 1997-1999 period, the price soared to VND60,000 per kilogram, leading to a boom in planting  pepper trees. In recent years, pepper prices have decreased sharply, ranging from VND15,000 to VND20,000, but still double that of coffee. Therefore, despite the ministry advising farmers to stop expanding cultivation areas, pepper outputs having continued to rise.

According to investigations of Agriculture & Rural Development Services in provinces of Binh Phuoc, Binh Duong and Dong Nai, expenses for cultivation of one hectare of pepper are around VND30 million (US$1,910)/year, including VND12-14 million (US$764-US$892) for fertilisers and VND15 million (US$955) for labourers. If pepper productivity is 2 tonnes/hectare and the selling price is VND18,000/kg, farmers will see almost no profit.

Vietnam Pepper Association (VPA) suggested farmers reducing pepper cultivation areas down to 45,000-50,000 hectares, focusing on quality, cutting costs and building trademarks for the products. Instead of expanding cultivation area, farmers should focus on intensive cultivation, choosing good seedlings, reducing usage of chemical fertilisers, pesticides and applying new methods in fighting against pests.

The other important issue is processing business. From only several factories including Vinahriss, Man, Truong Loc and Thanh Loc, now there are tens of pepper processing factories in provinces of Binh Phuoc, Binh Duong, Dong Nai and Quang Tri and Ho Chi Minh City with total capacity of processing 50,000-60,000 tonnes per year. Hence, the quality of pepper has been improved considerably. The ratio of high-quality pepper rose from 5 per cent in 2000 to 30 per cent in 2004.

Vietnam started exporting white pepper, whose price is two times higher than black pepper, from 2002 with a volume of 500 tonnes. Last year, export volume of  white pepper rose to 9,000 tonnes, accounting for only 7 per cent of total pepper export volume. Pepper export price now stands at around US$1,200 per tonne.

Being the leading pepper exporter in the world, however, Vietnam does not have a trademark for the product and has not entered the International Pepper Council. According to chairman of VPA, the goal of Vietnam’s pepper industry this year is to join into the IPC.

• Mai Anh