Will pepper prices still go up in the near future?

 

At the Vietnam Pepper and Spice Industry International Conference - VIPO 2024 held on March 8-10, Mr. Jasvinder Singh, Sethi, CEO and Founder of Namagro Vietnam, said that global consumption demand is about 600,000 – 700,000 tons.

This demand is met through imports and self-cultivation in the country. Asia consumes the most pepper in the world with 400,000 tonnes, of which half is imported, half is self-produced. The Americas consumed 110,000 tons, of which 90,000 were imported from other countries, while Europe imported almost all.

In terms of supply, he cited forecasts from the International Pepper Association (IPC) that said worldwide pepper production will decline by about 2% in 2024.

Not out of the trend, Vietnam's pepper production may decrease to about 170,000 tons, but exports can still reach about 240,000 tons. Brazil's output will fall more sharply due to climate change-related issues.

According to CEO Namagro Vietnam, two important factors to evaluate output are yield and harvested area.

Productivity depends on the weather and the motivation of the farmer himself. If farmers believe that pepper cultivation is profitable, they will take care of it and improve yields. However, low prices in recent years, coupled with expensive input costs, have left farmers with little incentive to persist in their pursuit of pepper.

In Vietnam, since 2017, no new planting areas have appeared, besides there are also situations in some areas, farmers switch to planting other crops.

All of this will cause supply shortages in the future. In addition, El Niño, La Nina phenomena and geopolitical instability exacerbate the situation.

For the pepper market, Jasvinder Singh Sethi also noted that it is not simply assessing supply and demand, but also assessing whether geopolitical conflicts of a region affect the supply and demand of that area and its vicinity.

In terms of prices, by compiling data, he observed that there is a rule that repeats three times in the past 50 years, that every time demand is greater than supply, prices also skyrocket, whereas when supply is greater than demand, prices will fall and remain at the bottom.

Pepper prices are currently stable and may likely increase in the near future. Supply is still not able to meet demand.

"Unlike turmeric or ginger, prices go up every year, farms grow more and the next year prices fall again, pepper needs another 3-4 years to ensure supply due to the shortage of planting area that appeared three years ago. Existing growing areas also face issues related to climate change but long-term demand for pepper remains strong," he said.

Pepper prices in the domestic market are continuing their upward trend in the first months of the year. In just three months (from December 2023), pepper prices have increased by up to 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 threshold recorded in March was 96,000 VND/kg.

According to some businesses and experts in the pepper industry, in recentyears, pepper prices in many countries such as Brazil and Indonesia are often higher than Vietnam, even at one time Indonesia did not have pepper to export.

In fact, at this time, only Vietnam is harvesting a lot. World prices are higher than domestic, adding to the fear of lack of goods and price increases, so many businesses actively increase the amount of purchases, pushing pepper prices up hot.

According to information from the Vietnam Pepper and Spice Association (VPSA), Vietnam supplies about 50% of global pepper production, but due to a sharp decline in area, Vietnam's pepper production in 2024 is likely to be at the lowest level in many years.