Pepper processors feel heat from price spike

This article is in response to the letter in People's Report titled 'Pepper farmers lament low prices from processors', published on Saturday, March 23, 2013.

First, the pepper processors are not the iron-fisted authoritarian institutions as would be suggested in the article. Many of them enjoy a very good relationship with their farmers that dates back many decades.

The author seems to be somewhat misinformed, as the current price of pepper is now $45, and not $40, and the price to pick the peppers is far from correct. There was also mention of farmers not receiving break-even price for their peppers. This is false, as the cost of producing pepper is about 50 per cent of the selling price based on pilot studies done.

Second, the article tends to be somewhat one-sided, not realising that the farmers are not the only ones facing rising input costs. Processors have been facing rising costs of packaging materials and other raw materials, not to mention rising electricity costs. There is also a new customs fee that imposes a $45,000 fee on every container brought in - a cost that has to be absorbed by the processors.

One must realise that Jamaica does not operate in isolation. The fact that we are a global economy means that we are in competition with other countries. In recent times, cheaper pepper products from other countries such as Costa Rica and Colombia have gained traction in the export market simply because they are cheaper.

If Jamaican processors are to remain competitive on the export market, our pepper prices must be on par, relative to the other producers overseas. Farming, like any other business, can benefit from economies of scale. As such, when a business increases output, revenue increases and unit cost decreases. A farmer producing 100lb of pepper a week will only gross $4,500, while a farmer producing 1,000lb will gross $45,000 a week.

While we cannot speak in absolute terms, for the most part, the majority of processors never planted their own peppers. The key to a successful business is utilising core competencies. Processors realise that farmers are not only an essential part of their business but are better equipped to produce peppers than they are. As a result, processors have outsourced this function to farmers. Processors and farmers share a symbiotic relationship, and both need to continue to work with one another for the betterment of themselves and Jamaica.

Please note that you cannot help the farmers by tearing down the processors.

Michael Ming

President,

Jamaica Agro Processors Associationjapa_397@msn.com