Hard times on pearl farms

South sea bubble

A surfeit of farmers and shortage of buyers tarnishes a once lustrous business

Mar 11th 2010 | SINGAPORE | From The Economist print edition
[pic]

Hard times on pearl farms

South sea bubble

A surfeit of farmers and shortage of buyers tarnishes a once lustrous business

Mar 11th 2010 | SINGAPORE | From The Economist print edition
[pic]
YOU can hear the relief in Rosario Autore’s voice when he talks about how his firm, Autore Pearls, one of the world’s largest pearl suppliers, survived the past 18 months. “Within the pearling industry we had a tough time,” he says. A slump in sales thanks to the global economic downturn and unexpected currency movements played a part. But the main problem underpinning the industry’s woes is a supply glut.

Andy Muller, a dealer based in Japan, estimates that the worldwide production of cultured “South-Sea” pearls (from South-East Asia, Australia and the Pacific) increased from 2.4 tonnes in 1998 to 12.5 tonnes last year. The increase was due chiefly to the rapid expansion of pearl-farming in Indonesia, the Philippines, and, to a lesser extent, Myanmar. This has dimmed South-Sea pearls’ glow: the value of the harvest at the farm gate fell from $220m to $172m over the same period. “At present, the cake served to overfed and cash-strapped consumers is too large to be digested,” Mr Muller says.

That leaves many pearl farms selling their wares below cost. In the Indonesian province of West Nusa Tenggara, 33 of 36 producers are said to have gone out of business. Some producers are responding by climbing up the value chain, making jewellery from their own pearls.

Others see the quota system that has restricted the supply of Australian pearls for almost 30 years as a model. “Good quality strands made from Australian South-Sea pearls still command prices of A$100,000 ($92,000) or more—the same as ten years ago,” says Andrew Hewitt of Arafura Pearls, an Australian producer.

Mr Autore thinks a global grading system is needed to identify pearls of the highest quality, wherever they come from. “A good pearl is rarer than a diamond,” he says. But there is no agreement about what colour or other qualities are most desirable. Consumers, in the meantime, are grading pearls with their pocketbooks.