The sharp increase in pepper prices has caused many export businesses to suffer losses due to having to buy at high prices and sell at low prices, while importers benefit more.
Export businesses suffer losses due to rising pepper prices
Pepper prices have recently returned to an upward trend after about two months of downward adjustment. As of August 27, pepper prices were trading at VND144,000/kg, recovering from a two-month low of VND137,000/kg set in mid-August.
Source: baoquocte (compiled by H.My)
Looking at the broader picture, pepper prices have skyrocketed this year, with current levels doubling since the beginning of the year. At its peak in June, pepper prices reached a near eight-year high of VND180,000/kg.
The story of rising prices always has two sides, there will be a group that benefits and a group that suffers. Sharing at the preliminary conference of the Pepper and Spices Association (VPSA) in early August, Mr. Ho Tri Nhuan, Director of Gohan Company, said that import customers are the ones who benefit the most while export enterprises suffer great losses.
Pepper export price developments – Data: General Department of Customs (compiled by H.Mị)
“In May and June, the export volume increased dramatically. This was also the time when pepper prices peaked at VND170,000 – 180,000/kg. However, the export price was only about VND100,000/kg. Businesses were forced to buy at high prices and sell at low prices. Meanwhile, importers sold at VND140,000/kg in the home country,” Mr. Nhuan shared.
The cause of this situation comes not only from the decline in supply (affected by weather and people’s crop conversion trends), but also from speculators.
According to Mr. Nhuan, many people have been holding pepper since the beginning of the year and have taken profits, but then they bought it again at the peak price. Overall, in the market, there are more people who lose than those who make a profit. Those who make a profit only make about 5,000 VND/kg, but those who lose are up to 30,000 – 40,000 VND/kg.
“The market has been extremely volatile, not simply because of supply and demand but also because of speculation. The speculative situation this year has been terrible. Even the top large enterprises have suffered quite a lot,” he said.
Talking to us, Mr. Le Duc Huy, General Director of Simexco Daklak, one of the largest pepper exporting enterprises, said that the pressure on businesses is currently very great.
“The average export price of enterprises is lower than the purchase price from the domestic market. However, farmers always think that enterprises make big profits. In fact, with the current volatile market context, any enterprise must strive to survive, let alone develop,” said Mr. Huy.
Farmers should not speculate.
To partially resolve the current market paradox, Mr. Le Duc Huy said that it is important for market participants to reduce their speculative thinking. Producers need to supply products to the market, keeping only a portion; avoid the situation where producers borrow money to speculate and hoard goods. This is against the laws of the market.
According to him, farmers should have the mindset of entrepreneurs and need to know how to regulate sales.
“People should not speculate or hoard goods while still in debt. Because if speculation is still under pressure of interest, it is often ineffective. Therefore, when farming is finished, people should sell to recoup costs and limit buying back for speculation,” said Mr. Huy.
He added that recently, there has been a phenomenon of people speculating at the price of 170,000 VND/kg. This poses many risks when people do not have financial capacity, leading to a sell-off at some point, putting pressure on prices.
Intermediary enterprises should play their role well as connectors and circulation agents, avoiding speculation and profiteering: When people need money, they can buy at a good price, and when export enterprises need goods, they can supply them fully. Export enterprises need to play their role well in harmonizing the interests of all parties.
“Everyone has their own responsibility. But I have to admit that it is very difficult to do this. There are many businesses participating in the supply chain. Each business has a different mindset and strategy and they always believe they are right,” he said.
> Vietnam boosts pepper imports to serve production and meet orders.
According to H. My (Business & Economics)
