THE PEPPER INDUSTRY IN VIETNAM

Introduction

In 2003, Vietnam has become the world’s largest producer and exporter of pepper. Although pepper has been grown in Vietnam for over 150 years, it is only from 1992/93 that it has played a significant role in the international market as producer and exporter. The unprecedented boom in prices during 1998, when the FOB price of black pepper exceeded US$4.00 per kg., motivated farmers in Vietnam to pay more attention to pepper cultivation. The area under pepper increased from 12,800 hectares in 1997 to 52,000 hectares in the five years that followed and production from 22,000 tonnes to 88,000 tonnes, an increase of almost 300%. This dramatic increase has not only made Vietnam a major player in the pepper industry but has also impacted on world pepper supply and consequently, the price in international markets.

However, in recent years, low prices coupled with problems of pests and diseases and drought have slowed down the expansion in planted area. Production has become stable as declining yields in some areas offsets output from newly harvested areas. Taking stock of the current situation, the government authorities, farmers and traders have become more concerned with controlling pests and diseases, replanting old and senile vines with high yielding varieties. New planting on marginal land is also being discouraged. Efforts to improve quality, profitability and sustainability of pepper cultivation are being undertaken at various levels and should bring benefits to producers as well as traders in the long term.

New pepper plantings in Vietnam

Production

At the end of 2003, total planted area was estimated at 52,000 hectares, of which the productive area was 73 % or 38,000 hectares The main production areas are in the Central Highlands and the South East, which together account for up to 84% of planted area. Historically, the South East area, with over 25,500 hectares, is significant as the area where pepper was initially produced on a large scale (Ba Ria Province). Though pepper was only introduced as recently as ten years ago to the Central Highlands, this area has quickly developed to become the second largest production region, with over 15,500 hectares planted. Pepper is also grown in the North Central Coast (4,200 ha), South Central Coast (2,400 hectares) and the Mekong River Delta (1200 hectares). High quality pepper, over 600 grams per litre and suitable for white pepper production, is grown in Quang Tri in the North Central Highlands and on Phu Quoc Island.

Irrigated pepper farm in Vietnam

Fertile basalt soils, gently sloping hills and generally suitable weather conditions have hitherto encouraged pepper production in these areas with yields of between 2.6 to 3.8 tonnes per hectare. A variety of planting materials are used, including local cultivars, Cambodian varieties, Indonesian varieties ("Lada Belangtoeng") and Indian varieties ("An Do") and production practices vary from farm to farm and area to area. Pepper vines are grown on concrete posts, brick supports, dead wood supports and on live supports. Irrigation is required for some areas, while other areas receive adequate rainfall. Most of the vines, about 50% of planted area (26,000 hectares), is between 4 and 10 years old, with about 27% around 4 years and about 10% over 15 years.

Cost of production varies widely, from as low as US$ 0.80 to as much as US$1.20 per kg. Production costs are dependent on agro-climatic suitability of farm location, need for inputs (fertilisers and pesticides), establishment costs (particularly related to type of support used and whether irrigation is required) and yields.

The total production for 2003 was estimated at 88,000 tonnes, 85,000 tonnes of black and about 3,000 tonnes of white pepper. Though the planted/productive area has increased, total production in 2004 is not expected to increase significantly, as a number of areas are reporting problems of drought, pests and diseases; the prevailing low prices have also reduced farm maintenance and fertiliser application in some areas and this will also adversely affect yields.

Table 1: Planted Area and Production

*Projected

The unrestrained planting of pepper during the years of high prices have placed several constraints on sustainable development of pepper in Vietnam. Little effort has been made to ensure that the variety or cultivars used are suitable for a particular region in terms of agro-climate or topography. Poor quality planting materials, which are susceptible to disease and infestation, have been used in many areas. Some areas of marginal suitability, with poor soils, prone to flooding or droughts or with steep slopes, have been planted with pepper and are now facing problems of maintenance. These conditions have been aggravated by the current low prices, the lack of effective measures to control pests and diseases, the increasing costs of inputs and limited experience and knowledge of many farmers.

The incidence of quick wilt (foot rot) because of phytopthera infestation is relatively high, with up 40% of plants affected in some areas. Slow wilt because of nematodes and mealy bug infestation are some of the other problems encountered by farmers.

On-farm processing to obtain black pepper is mostly manual, with a few farmers using mechanical threshers to separate the berries from the stalk. After sun-drying, the pepper is winnowed to remove stalks, light berries and foreign matter, before selling to collectors, local traders and processors. Farmers sell their pepper, which usually requires further cleaning and drying, at collection centers or ex-farm. Processors prepare black pepper for export, with mechanized processing facilities, handling and packaging equipment and adequate storage facilities. Black pepper is cleaned and light berries are removed to meet specific standards; generally pepper is marketed at 500 gms. or 550 gms. per litre. Some processors also undertake steam-treatment and market black pepper with low bacteria counts.

Processor/exporters, who are mainly state-owned or foreign, with a few local private enterprises, play a major role in the pepper industry in Vietnam as the primary link between consumers and farmers. Over thirty companies are registered as exporters, but the bulk of exports are handled by six or seven of them

Quality inspection services are provided by a government agency (Cafecontrol) and a number of private sector agencies. Other services, including warehousing, transport and fumigation are also available. Downstream processing activities such as grinding and packing for retail sale, however, are limited and primarily for the domestic market.

The production of white pepper is beginning to receive some attention in Vietnam. It is estimated that in 2004, white pepper production may reach 5,000 tonnes. Much of the white pepper is produced from black pepper and is of poor quality in terms of colour and aroma, but there is some white pepper of good quality produced in Phu Quoc province. The potential for large-scale production of white pepper appears to be limited.

In 2003, Vietnam officially recorded total exports of 74,638 tonnes of pepper, a decline of 3,513 tonnes (4.5%) compared to 2002. Exports to China that do not pass through Ho Chi Minh City customs may not be reflected in these figures. If cross-border shipments to China are included, it is estimated that total exports would be close to 82,000 tonnes in 2002 and 85,000 tonnes in 2003. Between 3,000 to 5,000 tonnes of pepper from Cambodia is also exported through Vietnam, which are not recorded in their import statistics.

What is apparent, however is that the quantum of exports has stabilised over the last year. The direction of exports shows that increasing quantities are being exported to consuming countries rather than to trading countries (e.g. Singapore and Netherlands), reflecting increased confidence in the quality of pepper exported as well as the improved capability of Vietnamese exporters.

Table 2: Exports by Destination (tonnes)

Monthly export data show that most exports, almost 60%, take place from March to June, following the main harvest in February, March and April. During January to March 2004, exports amounted to 19,629 tonnes, with 11,375 tonnes exported in March (during January to March 2003 the export was 17258 tonnes, with 11,109 tonnes in March 2003) Expectations are that the export for 2004 will not be significantly more than exports in 2003, between 85,000 to 90,000 tonnes, of which up to 5,000 tonnes may be white pepper.

Conclusion: Priorities and Prospects

The Vietnamese authorities (MARD) and the Vietnamese Pepper Association have indicated that the focus of pepper production and trade in Vietnam has shifted from area expansion to improving productivity and quality, thereby maximising returns. The focus of production, in terms of research and extension activities, is concentrated in areas with good agro-climatic conditions, which can sustain high yields. It is expected that a stable production base of 45,000 to 50,000 hectares will be maintained. Efforts to improve planting materials (resistant to foot rot, high yielding, good quality of output), farm practices (use of well-pruned live supports, mulching, pest and disease control, etc.) and post-harvest practices will be undertaken to ensure sustainability of pepper cultivation in Vietnam. Down-stream processing and packing for retail sale is expected to increase as local consumption increases.

Although a relatively large area of new plantings will be coming into production in 2005, total production is not expected to increase significantly. Some marginal areas (up to 5000 hectares) are expected to succumb to drought and disease, if current conditions continue. In the medium to long term, production and exports of pepper from Vietnam are expected to be stable at current levels, with consistent improvements in quality and productivity.