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Vietnam Pepper Export: Market Strategy
07 | 07 | 2007
Three years in a row, Vietnam pepper export maintained a stable level of 100,000 tonnes a year, taking the lead among world exporters.
The record high in 2006 was nearly 119,000 tonnes, with turnover of US$195 million. Japan, an up-market for agriculture products, has also increased imports of Vietnam high-quality pepper. With good signs for the 2007 crop, export turnover may hit US$300 million.
 
According to IPC forecast (International pepper association), in the coming years, pepper supply in the world market will remain lower than demand. Therefore the price will be stable around US$2,200-2,500 per tonne. Some contracts signed by companies in March 2007 show that they can get profit from the FOB price of VND36,000/kg (US$2,300 per tonne).
 
Opportunities
As most exporters tend to wait for higher price, transactions in the first quarter of 2007 were insignificant. According to Mr Do Ha Nam, President of Vietnam Pepper Association, it will hurt Vietnamese businesses, as they break the contracts without understanding international trade and hoarding. Retail sales groups can stop buying at the time of high price and wait for the crop of lower price. In fact, the pepper stock is small and the price has reached VND37,000/kg in February but no one was willing to sell. In a few weeks, the virtual price can be at a record high. Some may unwittingly buy in and finally sell at a big loss in the year end. The weakness will be exploited by hoarders. In addition, due to the El Nino impact, output this year will be 10 per cent less. If processing enterprises and exporters fail to act accordingly, they will suffer losses.
 
Price control
As the biggest exporter (accounting for 50 per cent of the world output), Vietnam can control the market in both policy and price. For instance, in 2007 with a bumper crop, Vietnam can control the border trade with China (18,000 tonnes/year) and retain a stock of 10,000 tonnes. However, to make the best use of opportunities, including the pepper crop two months later than other countries, Vietnam can sell at the time of high demand. In particular, exports must be restricted in September and October to avoid virtual price hikes early in the year, causing losses to both farmers and exporters. With logical export and stable supply the price can be under control.
 
Production method
As consumers, especially those in the US and EU, are increasingly looking for high-quality and safe products, import controls are more stringent. Malaysia and India have introduced their safe pepper products. While Vietnam keeps exporting crude pepper, other countries import it and process to get added value. The production method must be changed. Vietnam can process and supply diversified pepper products to meet world market demand.
 
VPA also warms that no new factories should be built, as existing factories are only operating at 50 per cent capacity. The export should be processed products instead of crude product. Exporters must upgrade their marketing. Mr Anandan, IPC Executive Director, said Vietnamese trademarks and brands must be propagated. Trade fairs can only help importers, as processed products are under their trademarks.
 
In mid-June 2006, the pepper price hit a record high of five years (2001-2005). It reached the level of US$3,000 a tonne for black pepper and US$4,000 for white pepper. While in previous four years, it was only US$1,150 a tonne. The high price was good for farmers and exporters. However, to maintain growth and improve the image of Vietnamese pepper, Vietnam must have a good development strategy.



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