Chinese rigging pepper prices: VPA
Domestic pepper prices have been fluctuating abnormally from late July until now, with the VPA blaming price manipulating measures used by Chinese businesses.
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On July 28, pepper prices in the morning ranged from VND80,000 to VND86,000 (US$3.5 - $3.8) per kilo, then dropped to VND82,000 per kilo in the early afternoon.
Currently, pepper prices are still bouncing up and down.
Tran Huu Thang, a pepper farmer in the southern province of Dong Nai, said pepper prices in the province dove sharply to VND75,000 per kilo three weeks ago, however, on August 8, the prices rose to VND95,000 per kilo.
Some pepper export enterprises attribute this price fluctuation to Chinese traders who order large quantities of pepper from pepper exporters at any price.
Then, they rush Vietnam’s exporters to deliver as soon as possible. Under pressure to fulfill the contracts, many firms buy pepper from farmers and agents at high prices.
Meanwhile, the Chinese traders contact the local pepper purchasing agents and promise to sell the pepper to them below market value. The agents agree, aiming to sell it on to exporters again. However, Chinese businesses only sell a small portion at a low price, then claim the product is out of stock and raise the price sharply.
Often, the Chinese firms break the high-price contracts they initially signed with exporters, receiving only a small shipment and then ignoring attempts by local exporters to contact them.
Oanh estimated that this it was difficult to estimate the damage this practice is causing; however, it could harm Vietnam’s exporters and the domestic pepper market. Therefore, the VPA suggested that enterprises be careful when trading with Chinese businesses.
In the first seven months of 2017, Vietnam’s pepper export volume was estimated at 145,000 tonnes and valued at US$800 million, up 20.4% in volume but down 18.2% in value against the same period last year, MARD reported.
The average export price in the first half of this year reached US$5,662.6 per tonne, a year-on-year decrease of nearly 30%.
MARD to timely resolve pepper enterprises’ petition
As part of Prime Minister Nguyen Xuan Phuc’s campaign to unburden businesses from unnecessary regulations, the Ministry of Agriculture and Rural Development (MARD) has resolved regulatory issues for pepper enterprises recently.
Last month, the Vietnam Pepper Association (VPA) asked MARD to solve enterprises’ difficulties in quarantine regulations when exporting, causing goods jams at ports.
According to the proposal, from mid-July, several enterprises told the VPA that pepper exporters face two main obstacles.
The first obstacle is some regulations on domestic plant quarantines. In line with Circular 33/2014/TT-BNNPTNT, a quarantine of export goods, including pepper, is still in place, meaning firms have to satisfy food safety regulations of importing countries before exporting goods.
Exports can be checked by Vietnam’s Plant Quarantine Inspection Department, a system that has ensured smooth exports of Vietnam’s pepper.
However, recently, the quarantine agency requested that all goods must be checked before export. With a huge volume of goods and a small number of quarantine employees, there are not enough people to check the goods, leaving many containers stuck at ports and causing late deliveries and high risk of contract breaches.
The VPA proposed MARD direct the quarantine agency to use the previous method and not inspect every shipment to help businesses export more easily.
“After receiving the VPA’s dossier, MARD assigned quarantine agencies to work with pepper export enterprises to solve the problem. As a result, the method of random inspection was applied as before and the exporting process is smooth again,” Nguyen Mai Oanh, VPA’s vice chairman and general secretary said.
The second obstacle in the petition relates to a recent decision by the Prime Minister, which dictates that good subject to quarantine, including pepper, can not be imported via express cargo customs.
In practice, this means all samples of agricultural products sent to Vietnam must go be imported by an organisation which is a legal entities in Vietnam, instead of via couriers as before. This complicated process affects laboratories researching pepper seeds as they need samples from abroad.
“As regards the second problem, VPA also proposed MARD in collaboration with Ministry of Industry and Trade and General Department of Vietnam Customs remove this obstacle soon so that pepper laboratories can more easily access samples for their research,” Oanh added.
