Farmers of Tahitian pearls are in dire straits. Prices have fallen so low the FP is abandoning their tax for three months. Even this measure will do little for the industry overall considering half the Tahitians in Asia were never taxed upon export. How can a small producer compete with a large one that has the ability to fly low-grade or even high grade off the atolls directly to market? How long can farmers last with prices as low as they are for small goods?The price of akoya in Japan dropped so low in 2008, it nearly on par with Chinese production. Farms are operating in the red. Nearly all the large farms have ceased production. Even the big players (Otsuki, et al.) are just buying at auction now. Nearly all farms are small, family-run operations that are living on loans and savings hoping to ride this dip out. It seems like there is no money left in the pearl farming game!
But no! That is not the case. There is still BIG money to be made.
The thing I love about publicly traded companies are their numbers. The numbers never lie. The numbers they report are the God’s honest truth. Take Arafura, for example.
Arafura tells is like it is. We learned from Arafura that Australia does depend on hatchery shell as well as wild catch. We learned from Arafura that the total quota is not used every year. This is not the tune of another private company down under. Sounds like there are some productions controls at work over there!
Arafura Pearls Holdings Ltd is a publicly traded South Sea pearl production company out of Australia. They control about 20% of the SSP market down under, and are second in quota size only to the great Paspaley. Arafura is reporting a net profit of $10.05 MILLION for the 2008 financial year. We are not talking straight sales here folks. That is NET PROFIT.
Well, how the hell can they do it?! Why are nearly all the other sectors of the production industry suffering so much?
It all comes down to control. Paspaley controls more than 50% of Australia’s output. They control the volume, many producers, and prices at auction, not to mention those per direct sale. The auction buyers are always bemoaning the “Paspaley Crazy Prices”. But they are buying! If Paspaley does not get what they think the pearls are worth, they pull them from auction.
Other producers love what Paspaley does. Why should they rock the boat? The Indonesians came out with cheap goods and started to make an undercut sweep, but they quickly learned the game, and the Philippines were already toeing the line behind Jewelmer. Now goods are mixed at auction and the prices are stable.
Some say “oh, look what the bad-old Paspaley is doing now.” Well shit, they may come off a little arrogant and high and mighty, they may piss off a lot of buyers, but damn it, South Sea pearls are here to stay. They are perfecting the method the Japanese created more than a half-century ago.
Will the Tahitians be able to pull it out and regain some of what they once had? Not unless they can find a hard-head like Paspaley and a hot-head like Kelly to captain the sinking ship – in my humblest opinion. The Japanese, well, they may already be too far gone.
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9 comments:
The labor costs in Japan are higher compared in China that is why Japanese find it difficult to sell their pearls since the quality difference between pearls of two countries is dissapearing.
The Australians are known to produce the best white South Sea pearls and other countries generally makes pearls of different color. That is why Australians don't have competitions for their white South Sea pearls and they can ask whatever prices they can for their high quality goods.
Tahitian pearls are not as beautiful and desirable as white and golden South Sea pearls so their demand decrease and so is the price. Other South Sea pearl producing countries also produces black pearls from Pinctada Margaritifera such as Japan and The Philippines competing against each other. Pearls from The Philippines are cheaper and also high quality. Tahiti should learn to produce other pearl colors as well and their target market for their black pearls should be men as women prefer white and golden pearls. Also, Tahiti as a country is more exotic and beautiful so I guess they have to include the origin of their pearls as one of the biggest selling methods as Tahiti in my opinion is the most beautiful place on the face of Planet Earth and pearls are the most beautiful souvenir from that paradise on Earth.
There should be money in pearl culturing as always because pearls are unique. They have no competition for their unique beauty and they are the most beautiful natural gemstone. Majorica pearls are quite obviously fake to me.
Pearls are still the most appealing gemstone a woman can wear. Every vain women should know that in order for them to look their best.
To answer your question on the WA Business News website, Arafura's quota was 220,000 virgin oysters each year in 2006. They might have bought more from other companies since then.
You'll find more info about quotas and such here:
http://www.fish.wa.gov.au/docs/op/op027/fop027.pdf
It's however a bit outdated.
That is interesting. I wonder what percentage of hatchery shell they use.
I heard today that Arafura uses all hatchery shell. In fact, at least half the shell used in Australia (Paspaley included) is hatchery.
Much of this is BS. Has gia13615093 priced Jewelmer's golden pearls? Certainly NOT "cheaper." Also: why are quite a few producers skewing away from color (such as gold or golden) to produce white?
Why? That answer is simple.
It is much easier to produce white South Sea pearls. It is very difficult to produce golden. It is not difficult to produce yellow, but gold is a color difficult to achieve. Gold South Sea pearl farming is not always a profitable enterprise. For the most part, the harvest is going to be yellow, not gold. It makes sense for most to produce white in that respect.
Jewelmer, however, has dramatically increased the gold to yellow ratio of their harvest through a selective breeding process. Their shell have a much stronger golden rim than the average gold-lip. They are reaping large rewards for this technological advancement. The best of Jewelmer's crop is more valuable than the best of Paspaley's, ignoring any size consideration.
Someone told me once that in Australia, the hatchery-bred mollusks are just as good as the wild catch, and in the North farmers are completely reliant upon hatchery mollusks.
Take a closer look at the accounts. The profit is a figment of IFRS accounting which means they've booked a $22m increase in the value of oysters and pearls, without actually having to sell them. Cashflow tells a different story - a negative $7m operating cashflow.
Of course, cashflow doesn't give an exact picture either, since cashflow can be expected to be negative while the number of oysters is being increased significantly.
The IFRS rules in this situation do not make good sense in my opinion. Oysters/pearls should be booked at cost as all other types of inventory would normally be until sold. With the current accounting, there is a significant risk they may have to book a loss when the stock is actually sold.
In addition to the above, $4.5m of income came from "sale of grower interest" into a managed investment scheme. In fact the total revenue from sales of pearls was less than $1.9m...
Hi gia136...
In golden pearls (and pinks) color saturation and origin has an enormous impact on price. The more golden, the more unaffordable. No matter how awful the shape or surface quality, you will never find naturally deep golden pearls cheaper. Please understand that the term "champagne" in golden pearl speak means brownish beige with a subtle greenish tinge. If they are a vibrant rose gold (the most desirable color) you are talking Burmese goldens and you might as well add at least two zeros to the price.
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