Businesses worry that pepper prices can be easily manipulated if they are put on the trading floor
Aug
The Ministry of Industry and Trade is currently soliciting comments from businesses on the establishment of a Commodity Exchange, and Pepper will also be one of the traded items, said Ms. Hoang Thi Lien - Chairwoman of the Pepper and Cayenne Pepper Association. (VPSA) said.
This is not a new idea, the previous proposal to establish a pepper trading floor was also proposed by the Vietnam Pepper Association (predecessor of VPSA) 8 years ago (May 2016). The association believes that Vietnam's pepper has accounted for over 50% of the world's trade output for many years and the establishment of the trading floor will help the industry have more power to develop the market and dominate global pepper trade. bridge.
VPA added that pepper is an item that can be stored in warehouses for 2-3 years, so farmers know how to keep goods waiting for the right price to sell, something that has never happened with other agricultural products. However, this mentality makes the pepper market unstable. That is also one of the main reasons for VPA to develop the idea of establishing a pepper trading floor, according to Finance Magazine.
In this draft of the Ministry of Industry and Trade, one of the general principles when building a Commodity Exchange is to enhance transparency, fairness and equality. Fraudulent acts, market manipulation, insider trading, abuse of monopoly position, or dominant market position that cause negative impacts on the relevant market are prohibited or handled with criminal sanctions. highest administrative violation.
Systems and rules for organizing and operating and participating in the commodity futures market must be established and perfected by entities to control, minimize and handle risks in the market , in order to limit excessive speculation. level and prevent systemic risks according to the provisions of law.
Some businesses believe that putting pepper on the exchange needs to be careful because there are many risk factors, including speculation, which has a negative impact on market stability.
Talking to us, Mr. Le Duc Huy, General Director of 2-9 Dak Lak Import-Export Company Limited (Simexco Dak Lak), one of Vietnam's largest pepper export enterprises , said that we should be very careful when put consumer goods on the exchange because speculative risks will increase greatly.
He took the example of coffee - a commodity being traded on world exchanges, which is also currently dominated by hedge funds and financial funds despite the huge output. Meanwhile, pepper output is not much, making it easier to coordinate. If there is intervention by large hedge funds, the price will not fluctuate according to the supply and demand of the real market and the price will fluctuate very strongly.
“Coffee is an example, sometimes the price is 30,000 - 31,000 VND/kg for 2-3 years, even when coffee output decreases but it still does not increase. Therefore, make pepper floors very carefully. If it is interfered with by financial funds, it will do more harm than good," said Mr. Huy.
According to VPSA, Vietnam's pepper output in 2024 is expected to reach about 170,000 tons. Meanwhile, with coffee, according to the Vietnam Coffee and Cocoa Association, the output in the 2023 - 2024 crop year is about 1.5 million tons, many times higher than that of pepper.
Similarly on a world scale, pepper production is about 465,000 tons while coffee production is about 10.2 million tons.
Sharing this same concern, sharing at the VPSA conference, Mr. Ho Tri Nhuan, Director of Gohan Company, said that with the current pepper market situation, the absence of a trading floor is better than having a trading floor. .
Without a commodity exchange, farmers, traders and exporters can decide the buying and selling prices. If there is a floor, the "financial forces" can push businesses into an "extremely difficult" position because of the very speculative nature of the funds.
“Currently, pepper is simply bought and sold as real goods. Only domestic speculation in a few months has caused manipulation and damage, let alone "paper goods". This causes extremely big consequences," Mr. Nhuan said.
Pepper prices in the domestic market increased sharply this year. As of August 23, pepper prices were trading around 143,000 VND/kg, nearly twice as high as at the beginning of the year.
Mr. Lam Hoang Quoc Khoi - Market Research Specialist of Nedspice Vietnam Company, warned that putting pepper on the trading floor could become an "official casino", if there is no appropriate management solution.
“Previously, when I read the trading principles on the floor, I found it interesting, but in reality, the coffee floor gradually degenerated into a casino, where people would bet on whether the price of coffee would increase or the price would decrease. down and the amount of money put into that exchange is 5 times larger than real transactions.
The state needs to consider solutions to avoid turning this into an official casino. The capitalization of the pepper industry is lower, only 1/6 that of coffee. Meanwhile, the coffee industry is manipulated like that, with small capitalization like the pepper industry, it is much easier to be manipulated," Mr. Khoi said.
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