Vietnam Pepper Exports Could Fall By 10 Per Cent

Exports of pepper from Vietnam, the world’s biggest producer, may fall by almost 10 percent this year as farmers hold back stock because the central bank’s interest-rate increases are raising their costs.

Shipments may decline to 75,000 metric tons, from 83,000 tons in 2007, according to Do Ha Nam, chairman of the Vietnam Pepper Association.

The estimate is based on a drop in the volume of exports in the first five months of the year, he said.

“Farmers don’t want to sell pepper now because they see increasing farming costs, so they want to wait for a higher price,” Nam said in an interview in Ho Chi Minh City recently.

“Vietnamese pepper exporters are having difficulties buying from farmers.”

Exporters’ production costs have increased after the State Bank of Vietnam raised interest rates three times this year to slow the fastest inflation since at least 1992.

Producers may hold back stock to wait for higher prices next year, Nam said.

The International Pepper Community, an association of producing countries based in Jakarta, forecasts a shortage of 54,000 tons of the spice globally this year, according to Nam.

Vietnam’s pepper association reduced forecasts for exports this year from 80,000 tons as banks increased lending rates to as much as 21 percent.

The central bank raised interest rates to 14 percent from 12 percent on June 11.

“Without increasing the buying price, traders don’t have much money because banks are charging a high interest rate for loans,” Nam said.

Farmers can stock pepper for about three years without damaging the quality of the spice, he said.

Vietnam’s average export price in the first five months of this year was US$3,500 a ton, compared with $3,300 a ton in 2007, according to the HCMC-based Vietnam Pepper Association, which represents 27 Vietnamese exporters.

“This will definitely boost exports from India as it is the second-biggest producer and push up local prices,” Harish Galipelli, head of research at Karvy Comtrade Ltd., said by phone from the southern Indian city of Hyderabad.

Vietnam shipped 35,000 tons of pepper with a turnover of $124 million in the first five months of the year, compared with 39,000 tons of exports worth $107 million in the same period last year.

Vietnam earned $271 million from 83,000 tons export last year.

The country’s largest pepper-growing areas are the southern provinces of Binh Phuoc, Dong Nai and Ba Ria-Vung Tau.

The country’s exports started with 10,000 tons in 1996, peaking at 116,000 tons a decade later.

The country produced 85,000 tons of the spice last year.

The next biggest growers were India and Brazil, which produced 50,000 tons and 35,000 tons respectively, according to figures from the International Pepper Community.

Source: Thanh Nien News