Pepper prices increased by more than 30% in less than three months and are forecast to remain high due to the reduced supply and external factors.
Within only three months (since December 2023), pepper prices have increased by more than 30%. By the end of February, the price of black pepper increased by 10,000 – 11,000 VND/kg compared to the end of January to 91,000 – 94,000 VND/kg. The highest level in March was 96,000 VND/kg.
Pepper prices are expected to remain high.
According to some businesses and experts in the pepper industry, pepper prices in many countries such as Brazil and Indonesia are often higher than in Vietnam. Now in the world, only Vietnam is harvesting a lot. Global prices are higher than in the domestic market. Due to concerns about shortages and price increases, many businesses actively increased their purchases, pushing up pepper prices.
Ms. Hoang Thi Lien – Chairwoman of the Vietnam Pepper and Spice Association (VPSA) said that the price of pepper is entering an increasing cycle. However, during this cycle, the price will sometimes decrease before going up again.
According to some businesses and experts in the pepper industry, in recent times, pepper prices in many countries such as Brazil and Indonesia have been higher than in Vietnam, even there were times when Indonesia had no pepper to export.
NOT ONLY SUPPLY-DEMAND
The supply-demand gap may cause pepper prices to continue to increase in the coming time. The supply of pepper in Vietnam and other major countries in the world decreased, causing a deficit of several tens of thousands of tons in the global market.
Mr. Jasvinder Singh Sethi – General Director of Namagro Vietnam Company said that through the data and observation, there is a rule that repeated three times in the past 50 years. That is whenever demand is greater than supply, prices go up strongly, on the contrary, when supply is greater than demand, prices will fall and remain at the bottom.
Pepper prices are now stable and may increase soon.
Pepper prices are now stable and may increase soon. Supply has not yet been able to meet demand. However, for the pepper market, businesses need to assess not only supply and demand but also geopolitical conflict of an area that may affect the supply and demand there and the surrounding area.
Currently, global consumption demand is about 600,000 – 700,000 tons. This need is met through import and self-growth. Asia is the world’s largest consumer of pepper with 400,000 tons, of which half is imported, and half is self-produced. The Americas consumed 110,000 tons, of which 90,000 tons were imported from other countries, while Europe almost imported.
According to the International Pepper Community (IPC), worldwide pepper production will decline by about 2% in 2024. Not out of the way, Brazil’s output will fall more sharply due to climate change-related issues. Vietnam’s pepper production may decrease to about 170,000 tons, but exports may reach about 240,000 tons.
Namagro Vietnam CEO said that two important factors to evaluate output are yield and harvest area.
The yield depends on the weather and the farmer’s motivation. In Vietnam, since 2017, there has been no new growing area. Besides, in some areas, farmers have switched to other crops. All of this will cause a supply shortage in the future. In addition, the phenomenon of El Nino, La Nina, and geopolitical instability make the situation more serious.
In major pepper-producing countries, Brazil has passed the harvest season while Vietnam is now entering the harvest. The main crops of Indonesia and Malaysia are in July every year. Supply from Indonesia, Brazil, Malaysia, and Cambodia that does not adequately compensate for the decrease in Vietnam’s exports will push up pepper prices from the beginning of the season.
Ms. Lien said that the pressure of supply decline will have a positive impact on prices. This motivates people to invest more.
According to the General Department of Customs, in the first two months of 2024, Vietnam’s pepper exports reached about 35,000 tons, worth 143 million USD. This result is down 12.3% in volume but up 12.9% in value over the same period last year. The average export price of Vietnam’s pepper is estimated at 4,041 USD/ton, up 28.7% over the same period in 2023.
The increase in the price of raw materials is putting pressure on exporters when orders have to be signed in advance. Many businesses forecast that 2024 will continue to be a volatile year for the pepper market, and the price will continue to increase.
Ms. Hoang Thi Lien recommends businesses adjust the price so that the import and sale prices have the same level of increase to avoid price risks. If domestic pepper prices increase, businesses need to increase export prices accordingly. If these are not guaranteed to increase appropriately, the business will have to bear the risk because they must ensure prestige and order. In addition, businesses can buy slowly, little by little, otherwise, it will impact on prices when there are large orders, creating more scarcity of goods./.