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 HANOI, Vietnam — At a time when commodity producers are enduring a slump in prices for everything from crude oil to iron ore to soybeans, Vietnam’s pepper farmers are prospering.

Black pepper trades at about $9 a kilogram ($20 a pound), from $2 a decade ago, whilewhite pepper costs as much as $13, a threefold gain, according to the International Pepper Community (IPC), a producer group in Jakarta. Consumption has exceeded supplyfor about eight years, boosted by demand for seasoning as Asia eats more meat, said Greg Estep, the global head of spices and vegetable ingredients at Singapore-based Olam International.

The surge in the $2.5 billion pepper export market contrasts with a fourth consecutive year of declining commodity prices as supply gluts emerge. Vietnam’s crop expanded 15-fold over two decades, displacing India as the biggest supplier, the United Nations’ Food & Agriculture Organization (FAO) says.

“I came to this land empty-handed,” said Nguyen Van Thanh, a 54-year-old who’s plantedpepper for the past 14 years in Dak Lak province. “Income from pepper allowed me to provide for my family, buy motorbikes, build and renovate my home.”

Thanh now harvests about 4.5 to 5 metric tons a year on his 3.7-acre plot in the CentralHighlands. He sells the pepper for about 190,000 dong ($8.90) a kilogram, or more than nine times his production costs, he said by phone Nov. 14.

Vietnam’s agricultural industry was boosted by the “Doi Moi” reforms of the 1980s, which opened international trade to farmers. They responded by planting more pepper, coffee and rice. The Asian nation produced 1.3 million tons of coffee in 2012, an 11-fold gain in two decades and second only to Brazil, according to the Rome-based FAO. Robusta futures prices jumped 23 percent this year in London trading.

Through the centuries, India and Indonesia’s Sumatra were the biggest pepper suppliers, said Marjorie Shaffer, author of “Pepper: A History of the World’s Most Influential Spice.” While pepper is a traditional crop in Vietnam, the nation only emerged as a major producer recently, said Shaffer, a science editor at the New York University School of Medicine’s Office of Communications.

“Before the 1990s, we didn’t even produce enough pepper for domestic use,” Do Ha Nam, chairman of the Vietnam Pepper Association, said from Ho Chi Minh City on Nov. 11. “Then output increased unbelievably after we opened up the economy.”

Vietnam harvested 122,000 tons last year, while Indonesia produced 63,000 tons and India 58,000 tons, according to IPC data. Global output was 375,800 tons in 2013, little changed from a decade earlier, even as exports surged 23 percent to 278,033 tons, IPC data show.

Rising pepper prices helped farmers prosper and allowed them to buy cars and bigger houses, Nam said. Almost half of Vietnam’s labor force is employed in agriculture, and the sector accounts for about a fifth of the economy, according to data in the CIA World Factbook.

Pepper is cultivated on vines, which grow best in tropical climates from 1,500 feet abovesea level, according to the IPC. Vietnam’s harvest runs from February to April, according to the FAO, which says pepper and ginger are the oldest traded spices. While the first exports were recorded 4,000 years ago, trade took off from the 1400s after Europeans pioneered maritime trading links with Asia.

The ratio of global pepper stockpiles to consumption now stands at less than 10 percent, from as much as 75 percent in 2004, according to Olam, which grinds pepper at plants inHo Chi Minh City for export.

“Vietnam becomes more and more important because it focuses on exports and does not have a rapidly expanding market for domestic consumption,” Estep said from Fresno, Calif. The country “has done a very good job of maintaining yields, maintaining productivity,” he said.

Growers have small farms in Vietnam, often 1 to 2 hectares, according to the IPC. Output averages 2.2 tons per hectare, compared with 400 to 500 kilograms in Indonesia.

Vietnam’s output should hold steady at 130,000 tons to 135,000 tons next year, said Nam of the Vietnam Pepper Association. Prices will also be similar, at $7,000 to $8,000 a ton, he said. That should be enough for Thanh, the Dak Lak farmer who’s planning to expand.

“I could buy a car if I liked,” he said. “But I want to buy more land to expand production first.”

- Bloomberg



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