The pepper and coffee markets have just experienced a sharp increase in prices. Accordingly, the price of coffee reached a record of nearly 120,000 VND/kg. Meanwhile, pepper exceeded 100,000 VND/kg after a long period of crisis, at times only about 30,000 VND/kg in 2021.
Shortage of supply while demand is high is the main reason for the sharp increase in prices of these two commodities. With pepper and coffee, after a long period of price crisis, people have cut down a lot of them to switch to other crops. In addition, bad weather has also affected output.
However, behind that are stories of the industry with speculation, people lacking motivation to return to pepper or stories about sustainable development.
To better understand the story of this industry, we had a conversation with Mr. Le Duc Huy, General Director of Simexco Daklak – top 3 coffee exporting enterprises and top 6 pepper exporting enterprises in the country.
Mr. Le Duc Huy, General Director of Simexco Daklak (Photo: NVCC).
Reporter: In recent times, pepper prices have increased due to a lack of supply because people had previously cut down many of these trees. In your opinion, is the fact that pepper prices have exceeded 100,000 VND/kg enough to attract people to return to this crop?
Mr. Le Duc Huy: Pepper prices have increased in recent times due to demand exceeding supply. In the long term, the demand for spices will continue to increase while Vietnamese pepper has reached its maturity and the current price is still not enough to stimulate people to grow more. However, it is difficult to determine at what price people can return to pepper because it also depends on the prices of other competing crops such as durian, passion fruit, coffee, etc.
Even if the pepper price reaches 100,000 VND/kg, it is still not attractive enough for people to grow it again because compared to the profits from other crops, especially durian, the income from pepper is still much lower.
Compared to coffee, pepper is still less profitable because coffee is easier to cultivate. Pepper is a vine and is extremely vulnerable. The yield per head of coffee is also much higher than that of pepper.
In addition, people have just experienced a pepper price crisis that lasted for many years, at times the price dropped to more than 30,000 VND/kg, so they do not have enough confidence to replant at this time.
Therefore, inventories will continue to decrease in the next 3-5 years. In the long term, pepper prices will hardly decrease further.
PV: The current trend is that markets are tightening requirements on maximum pesticide residues (MRLs), especially the EU, is this a double blow to the Vietnamese pepper industry, making it even more difficult for output to recover?
Mr. Le Duc Huy: As I mentioned, pepper plants are very vulnerable, so the use of fertilizers and pesticides is unavoidable. But this is also a cause for concern when the increasing standards of export markets are also a barrier.
Looking at the more positive side, this is a future trend, farmers will be forced to follow the path of “clean” farming, minimizing the use of chemical fertilizers, creating a good environment and landscape.
We ourselves have been pursuing sustainable farming for more than a decade, along with intercropping many types of plants. Therefore, the associated households have also overcome the price storm without having to cut down pepper plants. The trend for small gardens today is sustainable and multi-cropping.
As a result, the output products have very low pesticide residues and sell at good prices.
Reporter: The increase in pepper and coffee prices is good news for farmers, but for export enterprises, it is a big obstacle when they cannot buy goods to deliver to customers due to lack of supply. How to solve the problem of balancing the interests of all parties, that is, both farmers and enterprises are “happy” and the market is healthier?
Mr. Le Duc Huy: Exactly. The recent sharp price increase has caused many businesses to face difficulties, including us, because the supply of both pepper and coffee is decreasing. But the difference between businesses is how they respond to this situation.
Recently, the Government and associations have positioned Vietnam to become the kitchen of the world. We will become a country that produces consumer goods, packaged goods, and jarred goods for consumers to use immediately; instead of exporting raw goods as before.
Therefore, when focusing on the processing story, we can import raw materials from other countries to make consumer goods, when domestic supply is not enough to meet.
But the important thing is that market participants (including farmers) need to reduce speculative thinking. Producers need to supply products to the market, keeping only a part. Avoid the situation where producers borrow money to speculate and hoard goods. This is against the law of the market.
As for intermediary businesses, they should do well their role as connectors and circulation agents, avoiding speculation and profiteering: When people need money, they can buy at a good price, and when export businesses need goods, they can supply them fully.
Some foreign companies in Vietnam such as Olam, Nedspice, they are doing a very good job as connectors. They are making the market healthy. Export enterprises need to do a good job of harmonizing the interests of all parties, not forcing anyone to lower prices.
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 that they are right.
PV: Talking about the story of harmonizing interests, farmers have always been considered the “weak and powerless” in the supply chain. However, the negotiating power of pepper and coffee farmers has been increasing in the past two years. What do you think about this?
Mr. Le Duc Huy: This is very clear in the market and this trend will continue to increase because agricultural land is increasingly shrinking but the population is increasing, leading to an increase in demand for pepper and coffee consumption. It is inevitable that landowners will have more and more advantages in the supply chain. This is a very clear rule. But if you want a better supply chain, the model of linking farmers into cooperatives is still the most optimal and more efficient.
If we work individually, each person will do it in a different way, with different fertilizers and pesticides in small quantities. But if we work together, we can synchronize the use of fertilizers and pesticides and buy agricultural materials in large quantities at cheaper prices.
Even if they do well, cooperatives can become exporters. At that time, the role of intermediary enterprises will weaken if they do not do well, not creating any added value in the chain.
The current trend is that manufacturers are getting closer to end consumers thanks to the development of logistics systems and online sales platforms. It is normal for businesses that only care about competing for purchases and sales to be eliminated.
Photo: Thai Bana.
PV: So what should intermediary businesses like Simexco do to avoid being eliminated?
Mr. Le Duc Huy: We have done a lot to create added value and play a good role as a bridge for decades. We have linked a system of 40,000 farming households into groups to synchronize and better manage product quality by guiding them on sustainable farming and deep processing.
From those products, we introduce them to consumers, especially foreign markets. At the same time, we are also the ones to commit to the quality for distributors.
We are very happy if the producers can talk to the consumers. Because then the producers will know what the consumer market needs and what the requirements are so that they can proactively adjust, instead of forcing it like before.
PV: Thank you for sharing.
According to VietnamBiz.vn
