Pepper exports: Decreases in almost all markets, opportunities in the EU

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Pepper is sliding in the "whirlwind" of discounts. Photo: Internet

Export price decreases by 24.5%

According to the latest information from the Department of Agricultural Product Processing and Market Development (Ministry of Agriculture and Rural Development), in the first 8 months of 2019, the estimated export volume of pepper was 220,000 tons, equivalent to 561 million USD, up 27.4% in volume but decreasing 3.8% in value over the same period in 2018. Notably, the average export price of pepper in the period reached 2,556 USD / ton, down 24.5% over the same period in 2018.

The Import and Export Department (Ministry of Industry and Trade) said pepper prices were falling due to increasing global supply. However, in Vietnam, the quality of pepper is affected by excessive use of chemicals and pesticides, so the price is lower than that in other countries.

The Import-Export Department said 5 years ago, Vietnam’s pepper was the world leader in productivity and output. In the past 2 years, many countries such as Brazil, India, and Indonesia have become competitors to Vietnam in terms of output and quality. In particular, Brazilian pepper is better quality with 80% of the world market selling organic standards.

In addition, Vietnam has about 100,000 hectares of pepper for harvest with an average value of 24.7 quintals / ha, equivalent to an output of about 247,000 tons. While the price of pepper is still very low, the cost of producing pepper tends to increase. Vietnam's pepper production cost in 2018 increased by at least 10% compared to 2017. The selling price of pepper decreased by over 30%, causing huge difficulties for pepper growers.

Great opportunity from EVFTA

The Agro Processing and Market Development Department said in the first 8 months of 2019, while pepper exports to most markets declined in value due to the impact of the downward trend in the global market, pepper exports to Germany increased sharply in both volume and value. Specifically, in the first 7 months, exports to Germany reached 8,000 tons, equivalent to USD 23.4 million, up 53.3% in volume and 14.4% in value over the same period in 2018. Germany increased imports of pepper to serve the growing pepper processing industry in this country.

From the story of prosperous pepper exports in Germany, the Department of Processing and Market Development of agricultural products said in the context of Vietnam's pepper exports facing many difficulties and great competitive pressure, the successful signing of the Vietnam-EU Free Trade Agreement (EVFTA) will be a good opportunity for Vietnam's pepper industry to promote pepper exports, especially processed pepper to the German market as well as other markets in the EU.

Information from the Import-Export Department also shows that, in the EVFTA Agreement, EU countries commit to eliminate tariffs on pepper products (HS code 09.04) right after the agreement comes into effect. Therefore, the effective EVFTA will be a good lever for Vietnamese enterprises to increase exports to EU countries (especially for processed products that previously had a tax rate of 5-9%).

Some analysts said previously, exporting to the EU market had to meet individual standards of each country, while after the EVFTA came into effect, businesses only needed to meet the common standards of the whole bloc to be able to export to EU markets. Vietnam will also take advantage of opportunities to develop the pepper processing industry as EU investors move processing plants to Vietnam to take advantage of cheap raw materials and labor.

Opportunities are quite large, but Mr. Tran Cong Thang, Director of Institute of Policy and Strategy for Rural Agriculture Development (MARD), said with the EVFTA in particular and other markets in general, Vietnam's pepper exports currently face increasing technical barriers , especially in the context that Vietnam has repeatedly been warned about residues of plant protection drugs on pepper.

Typically, Metalaxyl chemical residues were found on pepper imported into the European market. Previously, the maximum permitted amount of Metalaxyl chemicals on pepper imported into the EU was 0.1 ppm, but the European Commission (EC) has requested to adjust this level to 0.05 ppm. By 2018, only 46% of Vietnam's pepper has met the export standards. Besides, Vietnam still faces the risk of origin of imported pepper products from third markets. Vietnam imports pepper from other producing countries, accounting for about 10% of Vietnam's total pepper exports, mainly for processing.

“In order for Vietnam to maintain and develop its position in the pepper industry, businesses, production households and managers are not subjective and must constantly innovate to improve productivity and product quality, ensuring guarantees of food hygiene and safety requirements and other requirements of importing countries,” Mr. Thang said.

Pointing out specific tasks, the representative of the Institute of Policy and Strategy for Agriculture and Rural Development said the State needs to build and develop production areas, follow good agricultural practices and follow international standards; strengthen control, minimize the use of synthetic chemical pesticides and work out solutions to support production households to develop organic pepper plantations; promoting the construction of information systems, forecasts and market development, especially foreign markets, to take advantage of opportunities to enter and expand markets; promoting activities of promoting pepper trade to potential markets like Mexico, maintaining and developing the position of Vietnam pepper in EU markets.

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From the perspective of enterprises, businesses also need to promote joint ventures to form associations with sufficient capacity to manage commodity activities; be active in researching market needs and consumption trends, especially in the EU market.

In the domestic market, prices of pepper fluctuated in August. Compared to the previous month, prices of pepper in Dak Lak, Dak Nong, Gia Lai and Ba Ria Vung Tau decreased by VND 500 / kg to VND 43,500 - 45,500 / kg. Pepper prices in Dong Nai decreased by VND 1,000 / kg to VND 43,000 / kg. Oversupply pressure on the world market continued to increase as the two major producing countries are Indonesia and Brazil, which entered their harvests, and inventories of major producing countries were still high.