VIETNAM PEPPER UPDATE 2

 Update pepper information

In a recent document sent to the Government, the Vietnam Pepper and Spice Association (VPSA) said that Vietnam is still ranked top 1 in the world in pepper production and export. However, in the context of competition and favorable market fluctuations for other crops such as coffee and durian, the area and output of Vietnamese pepper are decreasing.

The association said this year's pepper output is expected to decrease by 10% to about 170 thousand tons compared to last year, the lowest level in the last 5 years.

This agency is concerned that the level of competition from rival countries will become increasingly fierce, especially Brazil. Accordingly, this country has had a breakthrough in the last 5 years from 80 thousand tons in 2018 and is now expected to reach 100 thousand tons in 2024. This country's exports reach 80 thousand tons in 2023.

“Therefore, all efforts and support need to be focused on pepper to ensure stable area and output. Vietnam continues to take the initiative, playing a role in regulating world market prices as it currently does. today,” VPSA said.

In addition, VPSA hopes that state agencies will support and mobilize foreign partners to consider expanding investment activities in Vietnam.

The association said that the global corporation McCormick (USA) currently invests in many countries such as India, China and some European countries. This is also the largest importer of US spices. In 2023, the US will import 54 thousand tons of Vietnamese pepper, accounting for 20.5% of exports to markets. Of which McCormick imported 3.5 thousand tons.

However, this business has not expanded its investment in Vietnam even though it is the partner importing the most pepper. This company is currently just stopping being a partner and choosing a number of large companies to supply pepper for export to the US market.

According to VietnamBiz.vn
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FDI enterprises are the leading pepper exporters in Vietnam

 

According to VPSA data, VPSA enterprises accounted for nearly 90% of Vietnam's total pepper exports in the first quarter with a volume of 50,918 tons, an increase of 16.8% over the same period. In contrast, businesses outside VPSA only exported 5,794 tons, a sharp decrease of 82.5% and accounting for 10.2%.

Two foreign-invested enterprises, Olam Vietnam and Nedspice Vietnam, ranked first and second respectively in the ranking of Vietnam's largest pepper exporters.

In the first quarter, Olam Vietnam's pepper exports increased sharply by 50.4% to 5,792 tons. Similarly, Nedspice Vietnam also increased by 24.5%, reaching 5,245 tons.

Vietnamese enterprises ranked in the next positions include Tran Chau and Phuc Sinh, with volumes decreasing by 27.5% and 4.7% respectively...

Some businesses said that in addition to the burden of increased raw material costs, pepper export businesses are also greatly affected by high transportation costs due to escalating tensions in the Red Sea region, especially on the route to the EU. – where 20% of Vietnam's pepper is consumed.

Pepper market April 1, 2024: Market goes sideways, highest 95,000 VND/kg

 

Currently, farmers in key pepper growing areas in the Central Highlands and Southeast are entering the end of the 2024 harvest season.

Commenting on the export market, Ms. Hoang Thi Lien, President of VPSA, said that thanks to stable supply and guaranteed quality, Vietnamese pepper has advantages when penetrating markets. In particular, pepper exports to the Chinese market are expected to grow well this year. This country's annual pepper import demand is expected to be about 65-70 thousand tons. While in the first 2 months of this year, the amount of Vietnamese pepper exported to China only reached 816 tons.

According to preliminary statistics of the Vietnam Pepper and Spice Association (VPSA), in the first 16 days of March 2024, Vietnam exported 12,368 tons of pepper, including 10,518 tons of black pepper and 1,850 tons of white pepper. about 53 million USD. The main export enterprises include: Lien Thanh: 1,276 tons, Olam Vietnam: 1,139 tons, Nedspice Vietnam: 957 tons, Phuc Sinh: 900 tons, Haprosimex JSC: 824 tons.

In February 2024, Vietnam's average export price of pepper reached 4,050 USD/ton, an increase of 1.2% compared to January 2024 and a sharp increase of 34.7% compared to February 2023. In the first 2 months of 2024, the average export price of Vietnam's pepper reached 4,022 USD/ton, an increase of 28.1% over the same period in 2023.

In the opposite direction, pepper imports in the first 16 days of March 2024 reached 1,943 tons, total import turnover reached 7.2 million USD. Vietnam imports mainly from Cambodia, accounting for 43.2%, reaching 840 tons, and from Brazil, accounting for 42.4%, reaching 824 tons. Main import enterprises include: Olam Vietnam: 880 tons, Pearl Group: 306 tons.

Pepper prices cooled down due to the lack of Chinese purchasing power

 
After increasing by more than 30% in the three months from December 2023 to February this year, black pepper prices in the domestic market have leveled off and are showing signs of cooling down.

As of the trading session on April 10, black pepper prices in the Central Highlands and Southeast regions fluctuated between 90,000 - 91,000 VND/kg, down 2,000 - 6,000 VND/kg (corresponding to 2 - 6%) compared to end of last month.

Pepper prices decreased in the context of additional supply from the 2023-2024 harvest. Meanwhile, pepper  exports   decreased significantly compared to the same period last year due to the lack of Chinese buying demand.

Preliminary statistics from the Vietnam Pepper and Spice Association (VPSA) show that Vietnam's pepper exports in March reached 25,579 tons, down 28.8% in volume over the same period last year. 2023.

Accumulated to the end of the first quarter, Vietnam exported 56,712 tons of pepper of all kinds, with a turnover of 235.6 million USD, down 26.1% in volume (equivalent to 20,015 tons) and down 0.1% in value. turnover compared to the same period last year.

In particular, exports to China - Vietnam's largest pepper consumption market last year decreased by 95.8%, reaching only 1,083 tons compared to 25,919 tons in the same period. This number is even lower than the 2,138 tons achieved in the first quarter of 2022, when China was closed due to the COVID-19 pandemic.
This result makes China fall to 14th place in Vietnam's pepper export market in the first quarter, accounting for 1.9% market share compared to 33.8% in the same period.

This is contrary to many previous forecasts that China's demand will increase after the Lunar New Year and push pepper prices higher.

In addition to China, pepper exports to the African market also decreased by 23.1%, of which Egypt decreased by 9.7% to 1,389 tons and Senegal decreased by 38.0% to 588 tons.

However, the positive point is that  import  demand  of some other key markets is rebounding after a decline last year.

For example, the US market, Vietnam's number one pepper export market in the first quarter of the year reached 15,185 tons, an increase of 27.9% over the same period and accounting for 26.8% of the market share.

In addition, exports to India reached 3,793 tons, an increase of 19.6%; Korea reached 2,164 tons, a sharp increase of 179.9%.

Exports to Europe also increased sharply by 24.7% over the same period in 2023 and accounted for 26.3% of the market share, of which the largest export to Germany increased by 113.8% to 3,701 tons; The Netherlands increased by 76.9% to 2,598 tons; exports also increased in Russia (25.1%); France (8%); Spain (32.3%), Italy (203.6%)…

The average export price of black pepper in the first quarter reached 3,966 USD/ton, white pepper reached 5,552 USD/ton, an increase of 562 USD/ton and 593 USD/ton respectively compared to the same period in 2023.

Will pepper prices still stay high in the near future?

 
Although there is a downward adjustment, pepper prices are expected to remain at a high level in the near future.

In a recent report, the Import-Export Department (Ministry of Industry and Trade) forecasts that pepper prices in producing countries will continue to remain high due to increased demand, while supply from producing countries Indonesia, Brazil, Malaysia and Cambodia are not enough to compensate for the decrease in exports from Vietnam.

Currently, consumers around the world are willing to pay high prices for high quality pepper. In particular, the US, EU, Middle East markets... increase the need to import products that meet sustainability in social, environmental and economic aspects throughout the supply chain.

Meanwhile, in countries with large pepper production, Brazil has passed the harvest season, Vietnam has entered the season, while the main harvest of Indonesia and Malaysia is in July every year.

Information from the Vietnam Pepper and Spice Association (VPSA), speculation is the main reason leading to the "hot" increase in pepper prices. Vietnam's harvest is in its main season, so the phenomenon of hoarding goods pushing up prices will not likely happen in the near future.

However, pepper prices are forecast to remain high. This year, the harvest was early due to the hot weather coming early due to El Nino. Harvest is expected to end at the end of March. The actual output is lower than VPSA's expectation, estimated at only 140-150 thousand tons.

According to VPSA, Vietnam provides about 50% of global pepper output, but due to a sharp decline in area, Vietnam's pepper output in 2024 may be at its lowest level in many years.

According to Nedspice Group, the scale and timing of new export demand in Vietnam will determine the price trend in the coming months, especially China plays an important role.

Nedspice Group forecasts global pepper production to reach about 465,000 tons in 2024, down 6,000 tons compared to the previous year. In addition, global pepper consumption is expected to be at 529,000 tons, 64,000 tons higher than production. This caused inventory to drop to its lowest level in the past 6 years.

Vietnam's harvest this year according to Nedspice is about 157,000 tons, down 15% compared to the previous year. In recent years, there has been very little new pepper planting in Vietnam and many old trees. At the same time, the area of ​​pepper trees is also shrinking and being replaced by crops that bring better income such as durian.

Nedspice believes that rising pepper prices will encourage farmers to increase production, boosting pepper productivity in the coming years. However, new planting will take time to harvest, so output is unlikely to recover soon.

Pepper productivity decreased sharply due to prolonged drought and disease

 

Prolonged drought, along with many diseases, caused pepper productivity in Kien Giang to decrease sharply, and farmers were less happy because the pepper crop failed.

Pepper prices are rising again after a long period of low levels. Currently, traders are buying at the garden for 95,000 VND/kg, an increase of nearly 30,000 VND/kg compared to the end of 2023. Although prices have increased, many households grow them. Pepper in Kien Giang is still not happy because this year's pepper crop failed and the harvest yield was low.

Mr. Thach Nat, a  longtime pepper grower  in Ha Tien City, said: "Each pepper planting post, if the weather is favorable and well cared for, can yield from 800g to 1kg. However, this year the harvest only reached less than 500g/head. The reason is due to prolonged drought and lack of irrigation water, pepper plants do not develop well and bear little fruit."

As the owner of a pepper purchasing and processing facility in a commune on the outskirts of Ha Tien City, Mr. Ngo Hoang Du said: "It is now the harvest season but each day the facility can only purchase a few dozen kilograms of raw pepper. Because this year's pepper crop was poor, farmers harvested low yields. Furthermore, because pepper prices are increasing, there are households who are not in a hurry to sell right away but wait for the price."

Mr. Tran Quang Giau, Director of the Department of Crop Production and Plant Protection of Kien Giang province, said that currently the whole province only has about 384 hectares of pepper growing, scattered in the districts of Giong Rieng, Go Quao, U Minh Thuong, Kien Luong, Kien Hai, Ha Tien City and Phu Quoc.

Recently, because pepper prices are low while input costs are increasing, the more they grow, the more they lose money, so farmers destroy pepper gardens and switch to other crops. In addition, many pepper gardens in Go Quao, Giong Rieng, Phu Quoc are infected with diseases, commonly slow death, quick death, crazy pepper, nematodes with a total area of ​​more than 26 hectares, affecting harvest output.

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.