Kampot pepper suffering as supply exceeds demand
South Korea struggles to attain two per cent GDP growth this year
KAMPOT pepper, one of the Kingdom’s top Geographical Indication (GI) products, is under pressure as over-cultivation drives farmers to give up production, said Kampot Pepper Promotion Association (KPPA) president Nguon Lay.
Lay said farmers’ production has continued to increase annually despite the volume of orders remaining the same, which has created an oversupply of the crop.
In 2017, annual exports were around 70 tonnes with production reaching 102 tonnes, he said, adding that farmers can only sell part of their total output.
“Our pepper is saturated, little is sold on the market and our production has exceeded demand. Now, there are only smallholder farmers and large companies which continue their efforts to cultivate [the crop].
“Growers [with large plots of land] who do not have their own packaging machinery have exhausted their capital. It’s been three years since they’ve been able to sell [their crop]. Their containers are full of pepper,” said Lay.
He said the pepper harvest season runs from January to June every year and as of last month, there had been no expansion of the crop.
“Today, most companies which used to buy pepper from farmers now have their own pepper farms. They will only buy from farmers if they do not have enough,” he said.
Kampot pepper was recognised as a GI product by the World Trade Organisation in 2010. The crop currently covers a cultivation area of 250ha, exclusively in Kampot and Kep provinces.
However, Pok Ly, a 70-year-old pepper farmer who has cultivated pepper for more than 20 years, said a lack of technology was the main factor forcing farmers to abandon the crop.
“Many smallholder farmers and large land farm owners have given up partly because of a lack of technology. They do not want to give it up but they always fail in production, they have no other recourse,” he said.
Ly said that as of June this year, he could sell only a little more than a tonne of pepper.
“There are still more than four tonnes left at home now, it won’t sell. But I will not give up on it. I can sell some of it, enough to make up for my expenses,” he said.
Lay said the EU is the main market for Kampot pepper, which accounts for 50 per cent. The US, Japan and South Korea account for another 20 per cent and the domestic market 30 per cent.
The KPPA’s membership increased from 387 families in 2017 to 440 this year, as distributors increased from 21 to 35 companies.
However, the Kampot pepper price remains stable, with black pepper selling for $15 per kg, red pepper $25 and white pepper $28, said Lay.
Hyn Piseth, deputy managing director at Confirel Co Ltd, a Kampot pepper exporter and producer, said counterfeits of the Kampot pepper brand are one of the main reasons buyers do not trust their products.
“Counterfeiting the Kampot pepper brand affects our pepper exports,” said Piseth. IN LIGHT of the trade conflict with Japan and other external risks, concerns are mounting that South Korea’s economic growth this year may fall below two per cent at worst, lower than the range of 2.2-2.5 per cent forecast by the government and the central bank.
The state-run think tank Korea Institute for International Economic Policy said in its recent report that Japan’s export restrictions would reduce Korea’s gross domestic product ( GDP) by 0.27-0.44 percentage point.
The report was published on Thursday, a day prior to Tokyo’s decision to remove Seoul from its list of preferred trade partners, and therefore referred only to export curbs imposed early last month on three key materials crucial for semiconductor and display businesses.
“It is difficult to estimate the regulatory categories [of the imminent whitelist removal] and the impact it may have on the Korean economy and the global economy,” the report said.
Considering aggravated relations between Japan and Korea, the actual GDP for this year may face a steeper decline, market experts noted.
Local brokerages Eugene Investment & Securities and Hana Financial Investment said last week that trade friction with Tokyo could bring down Seoul’s growth rate by 0.6 percentage points and 0.8 percentage points, respectively.
If these pessimistic outlooks turn out to be true, South Korea’s year-on-year GDP growth would fall under the two per cent mark.
The Ministry of Economy and Finance early last month lowered its outlook for the country’s growth rate to the 2.4-2.5 per cent range, down 0.2 percentage points from its earlier suggestion.
The Bank of Korea (BoK) also cut its outlook to 2.2 per cent, down 0.3 per cent from its April figure.
Despite the adjustments, speculation has been rampant that Seoul’s economy may not even achieve these modest target figures this year, due to external risks, ranging from Sino-US trade tension to the struggling semiconductor industry and the Korea-Japan economic war.
As of last month, at least 10 global market observers predicted that South Korea’s GDP growth would linger in the one per cent range this year, which would mark the lowest yearon-year GDP growth since the 0.8 per cent observed in 2009.
While the Bank of America Merrill Lynch suggested 1.9 per cent, Standard Chartered anticipated one per cent.
“Though there are various uncertainties, it is indisputable that the 2.2 per cent forecast suggested by the BoK is facing considerable threat,” said Meritz Securities analyst Yoon Yeo-sam.
“Should the current KoreaJapan problem expand at any time, the growth rate will drop, possibly around the two per cent mark or lower.”
Eugene Investment & Securities analyst Shin Dong-soo also said GDP growth is likely to be “around two per cent at best” this year.
Though refraining from jumping to conclusions, the central bank has left room for additional monetary easing measures and prospect amendments later this year.
“If the economic conditions worsen, [a rate cut] will of course have to be considered,” BoK governor Lee Ju-yeol told reporters on Thursday, after the US Federal Reserve’s announcement of a policy rate cut.
The monetary chief ’s remark was seen as a shift from his previously prudent stance, boosting speculations that GDP outlook may also be revised down.
Seoul’s centra l bank is due to announce its rev ised economic outlooks i n November.