The Hindu Business Line : Pepper exports drop as Vietnam supply hots up

VIETNAM'S emergence as the top producer and exporter of pepper in the world has not only stripped India of its importance as a major exporter but also pushed down international prices in recent years.

Vietnam's production in 2003 stood at 85,000 tonnes; while it is estimated at 90,000 tonnes in 2004. As domestic consumption is negligible, over 90 per cent of the production is exported.

Besides India, the other IPC (International Pepper Community) member-producers are Brazil, with an estimated production of 45,000 tonnes in 2004, Indonesia (56,000 tonnes), Malaysia (21,000 tonnes), Sri Lanka (11,500 tonnes). Non - IPC member-producers include Vietnam, China (30,000 tonnes), Thailand (9,500 tonnes), Madagascar (2,500 tonnes) and Cambodia (4,000 tonnes). Thus, the global production in 2004 is estimated at 3,26,500 tonnes. The domestic consumption in producing countries is estimated at 1,26,803 tonnes of which 59,000 tonnes would be absorbed by the Indian market.

The quantity available for export is estimated at 2,72,787 tonnes in 2004, of which an estimated 2,25,300 tonnes might be exported leaving a carry-forward stock of 47,487 tonnes. Thus, there is disequilibrium in demand and supply, pushing down the prices.

Vietnam entered the world pepper market in 1990, with a production of 8,623 tonnes from a total area of 9,196 hectares. The production increased to 20,000 tonnes in 1995 and further to 85,000 in 2003.

As per statistics published by the General Statistical Office, Hanoi, export in 1990 was a meagre 1,288 tonnes, valued at $1.89 million and the average unit value realised was $1.47 per kg. Since then, production and export have increased consistently, and by 1995, production reached the level of 20,000 tonnes and exports 17,900 tonnes, valued at $37 million. During the year, the unit value realisation was $2.07 per kg. By 1999, export further increased to 28,000 tonnes, the value to $117.71 million and unit value to $4.20 per kg. By 2003, it saw a nearly four-fold increase. However, the export earnings remained more or less the same at around $120 million.

The decline in unit value, from $4.83 per kg in 1998 to $1.59 per kg in 2003, "has actually offset the increase in exports from 22,000 tonnes to 80,500 tonnes by Vietnam," Mr S. Kannan, Director (Marketing), Spices Board, who was in Vietnam early this month, told Business Line. If the price had remained around $4 per kg, Vietnam could have earned foreign exchange worth $330 million.

From the production and exports figures for the last five years, it has been noted that there is an oversupply of around 40,000 tonnes. The major factor for this is the increase in production in Vietnam from around 20,000 tonnes to 85,000 tonnes. Efforts by all the producing countries, especially Vietnam, by keeping excess production between 30,000 and 40,000 tonnes could keep the price at a reasonable level, he pointed out.

Ever since Vietnamese pepper entered the world market in a big way at lower prices, Indian exports started falling from 48,743 tonnes in 1993-94 to around 22,000 tonnes in 2002-03 and an estimated 16,800 tonnes in 2003-04.

The increase in production in Vietnam and the consequent low prices have paved the way for the entry of Vietnamese pepper in to the Indian market directly and indirectly, Mr Kishor Shamji, President, India Pepper and Spice Trade Association, told Business Line. According to him, Vietnamese farmers are not in a position to hold the produce. The exports are mainly done by international players who had set up processing units in Vietnam in recent years. The farmers are selling their produce in advance to the industry there. Besides, there is no mechanism to regulate the supply, he added.

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