Currently, the price of pepper in the market continuously decreases and is at around VND 120,000 / kg, down 30% compared to the middle of 2016 and equal to the price of August 2011. Why is the price of pepper so decreased? How much will the price of pepper decrease? And, what are the pepper growers thinking?
Supply is exceeding demand?
In December 2016, the Vietnam Pepper Association (VPA) had a survey team of pepper production in localities where pepper is grown to forecast pepper output in the 2016/2017 crop. From the collected data, VPA forecasts that Vietnam's pepper output is estimated at about 180,000 tons, an increase of at least 15% compared to the previous crop.
In recent years, Vietnam has been the largest pepper exporter in the world, accounting for 50% of global trade of pepper. Therefore, if Vietnam needs to increase production, soon, the price of pepper on the world market will tend to decrease. Pepper prices have been falling recently, according to Ms. Nguyen Mai Oanh, VPA Vice President, due to weak supply.
In addition, the price reduction is also partly related to the “psychological factor”, which makes businesses reluctant to buy and store pepper which is caused by the recommendations of the European Commission (EC).
Psychological factors from technical barriers
According to VPA, although Vietnam has been the largest pepper exporter in the world for many years, the quality of pepper is also becoming a barrier as the major markets are adding more “technical barriers” to the face. imported pepper, of which the problem is of pesticide residues. This is most evident in the EU market, an important market for Vietnamese pepper.
Specifically, the current obstacle is the problem of Metalaxyl chemical residues on Vietnam's export pepper. Previously, pepper exported to the EU market, the maximum permitted amount (MRLs) for Metalaxyl is 0.1 ppm, but in 2017, the European Commission (EC) is proposing to apply allowable MRLs of only 0 , 05 ppm. If this proposal is passed, Vietnam pepper will have difficulty exporting to Europe.
In a letter to VPA of the European Spices Association (ESA) in late January 2017, ESA said that in 2016, they analyzed 799 samples of Vietnamese black pepper imported into the EU, only 17% of the samples had Maximum residue below 0.05 ppm. Thus, if the EC's proposal to apply MRLs for import pepper is approved, more than 80% of pepper exports to the EU of Vietnam will be difficult (in 2016, Vietnam's pepper exports will be difficult. to the EU is 40,000 tons, equivalent to 23% of the export pepper).
That said, just seeing an adjustment in the maximum amount allowed for MRLs, Vietnamese pepper will face difficulties immediately. According to some pepper exporters, the EC wants to adjust the maximum permitted amount of Metalaxyl of 0.1 ppm to 0.05 ppm as a technical barrier rather than a consumer health concern. use, because a Metalaxyl content of 0.1 ppm is said to ensure consumer health without having to be reduced to only 0.05 ppm.
In another market, the US, which has the same amount of export pepper as Europe, it is likely that exporters will also have to receive unhappy information. According to VPA, the US management agency also said it is preparing to issue a series of new regulations on the quality requirements of imported agricultural products, including pepper.
Currently, businesses and importers are in a state of waiting to see if the recommendations of the EC have been approved or not, so that, the action of domestic exporters is to reduce the amount of transactions. This is shown when Vietnam's export volume of pepper in January 2017 reached only 8,000 tons, down 37% compared to the same period in 2016. Therefore, according to some experts and enterprises, pepper prices decreased. partly due to psychological factors.
There should speculate?
Pepper is an agricultural commodity and like coffee, pepper has been traded on commodity exchanges in India and possibly in Vietnam in the near future, i.e. pepper is being traded in two. forms of real and paper transactions.
Many businesses and farmers in Vietnam – the capital of the world pepper, often choose to trade real goods. The question is that with the current price reduction, what should businesses, dealers and pepper growers do?
Normally, the decision of farmers to sell is based on the forecast of pepper price increase or decrease compared to the present. In this case, the stakeholders forecast that the price of pepper will continue to decline in the near future, and thus, as a rule, growers will sell pepper to avoid losses. On the contrary, if the price of pepper is forecasted to recover, growers and especially agents will take advantage of buying to reserve, speculating and waiting for the price to make a profit.
So in theory. In fact, in Vietnam, what is the market for pepper at this time? Is there a sell-off or psychology of keeping goods waiting for prices to rise?
Ms. Nguyen Mai Oanh said, currently, pepper growers are keeping pepper not sold so many exporters want to buy but cannot buy. Thus, pepper growers still believe that in the near future, the price of pepper will rise again. The VPA, on the other hand, has a reverse forecast due to factors such as domestic output and technical barriers of importing countries.
According to VPA, keeping farmers not to sell when prices are falling now may be a “unwise” decision because there are no market signals to ensure pepper prices will rise again.
Who will be right? Time will have the best answer.
Source Vu Ha (baochinhphu.vn)
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