VIETNAM PEPPER & SPICES MARKET UPDATE – WEEK 29

According to data from Vietnam Customs, in the first 15 days of July, Vietnam exported 14,320 tons of pepper, with a turnover of 52.7 million USD. Progressively from January 1st to July 15th, 2021, Vietnam exported 168,204 tons, total export turnover reached 548.8 million USD.

Vietnam facing with the serious development of the epidemic in many provinces and cities, the government has imposed social distancing, restriction, lockdown. Therefore, most export companies have focused on production and boosted exports for all order already signed with customers. It is forecasted that the export volume in July will reach approximately 28-30,000 tons, bringing the total export volume in 7 months reached 180 - 184,000 tons (same period last year reached 184,571 tons) although the business situation in the past month was very slow due to freight charges, booking, long holidays of the US / EU /Middle East...

Currently, the supply chain has been broken and the ability to supply pepper and other product for export has been seriously affected. Let's take a look at some notable news from the past time.

• After selling pepper after harvesting, now pepper materials are almost concentrated in households with good financial conditions. They only sell materials when absolutely necessary to cover temporary costs.

• Currently, households are also very limited in contact with and selling to agents /dealers due to / lockdown from the government as well as fear of epidemics situation.

BLACK PEPPER OUTLOOK: MID-YEAR REVIEW 2021

The report below was published by IPC and Namagro.
We believe it is very consistent and offers a very clear vision of the market which this year due to exceptional crisis cause by the COVID pandemic is very confused. 
MW
manager@peppertrade.com.br

Summary

# Aug/Sep period is period of convergence and is the only period with stock availability in all three major origins.

# We expect markets to align close to 3700/3800 USD/MT for 570 ASTA at an FOB Level.

# We expect EU to be back after holidays and book Indonesia and Brazil. 

# USA is expected to book new crop Vietnam and Q4 shipments from Brazil.

# Chinese demand could bring a squeeze suddenly. This may not happen in the next 15/30 days as Vietnam enters severe lock down.

# For MRL pass buyers are expected to turn to Brazil due to better freight rates

# Freights from Asia to NA/EU will remain firm.

# Overall activity in Vietnam is expected to be slow as stock at farm gate is lowest as compared to previous 2/3 years . 

# Downside is Demand from ME is expected to be slow as destination prices are lower than origin price 

# Fundamentally global demand for pepper remains strong with supplies not growing.

# Therefore any softness in the market should be seen as a buying opportunity.

----------------------------

Indonesia Price Outlook

Current price for ASTA Fob USD 4000/ MT
We expect prices to drop to 3800 USD/MT and align with Brazil to cover impact of freight
Slow Demand from traditional destinations will be countered by lower crop.
Unless Arbitrage improves Indonesia may not import from Vietnam.

Supply disruptions due to Covid are expected and market is inactive.
It is possible in the later part of the year prices rebound as China is uncovered and they would be aggressive in Vietnam and Indonesia.

Freights are not expected to reduce for next 3/4 months.

--------------------------------

Vietnam Price Outlook

Current price for ASTA Fob USD 3850/ MT
We do not expect prices to drop sharply.
Slow Demand from traditional destinations has been already factored in.
Unless Arbitrage improves Vietnam may not import from Brazil.
Supply disruptions due to Covid are expected and market is inactive.
It is possible in the later part of the year prices rebound as China is uncovered and they would be aggressive in Vietnam and Indonesia.

• The origins processors especially ingredient factories, unlike previous years, have sold for 2022 and are carrying stocks. This means farmers have sold their produce much earlier and do not have much stock in hand.
• This is evident by the fact that despite a lock down and poor fresh sales for the past 3 weeks prices of raw material is steady.

Freights are not expected to reduce for next 3/4 months.

-----------------------

Brazil Price Outlook

Current price for ASTA Fob USD 3900/MT
We expect prices for ASTA Fob should drop by 10% to USD 3600/MT
Drought and low crop is factored in.

Demand from non traditional destinations like ME will remain low.
Unless Arbitrage improves Vietnam may not import.
Supply disruptions due to Covid are not expected.

It is possible in the later part of the year prices rebound as China is uncovered and they would be aggressive in Vietnam and Indonesia.

Therefore,one can wait a little for the opportunity but being too pessimistic may not be wise.

VIETNAM PEPPER & SPICES MARKET UPDATE 28th JUNE 2021 - WEEK 26

 

PEPPER

 

Although the situation of freight rates and epidemics is still complicated, besides the lack of liquidity in the domestic market from exporters / collectors at different times. However, the market has had very strong gaining sessions in the past week with an increase of 4%. The main reason is that Vietnamese exporters actively buy raw material for June shipment. In addition, with a forecast quantity not less than 50,000 tons to be exported in the next 2 months, July and August, so farmers / dealer stock is now being too tight. Besides, the demand from different markets such as EU / USA / ASIA and China has also pushed up the domestic market. Thus, pepper prices in June have increased by 9.2% compared to May.

The market has gone through half of the crop of 2021 with a fluctuating but very steady increase since May. Therefore, farmers and dealers have a solid basis to believe that pepper prices will continue to increase in the second half of 2021 as different reasons that we have analyzed in the 24th week report.

 

Indonesia; The epidemic situation is still complicated and the harvest is expected to be come later than expected. Crop size is estimated to be poor and the quantity used for export in 2021 is forecasted only around 10 - 15,000 tons (Crop size around 30.000 tons max but huge domestic consumption already reached 15.000 tons). However, the situation of containers and freight from Indonesia is very stressful and it is difficult to get containers with high rates. Therefore, the price and time of shipment to abroad have not been fixed.

 

Brazil; The second crop of Brazil will start in end August / early September but quantity with max 25.000 tons. Prompt shipment still available but higher price compare with Vietnam. The Brazilian real Currency traded around 4.9 per USD in the fourth week of June, its highest level since June 2020, after latest data showed Brazilian consumer inflation surged in the first half of June, suggesting further monetary policy tightening, while the country's current account deficit was at its smallest in more than 13 years.

Therefore, it is likely that the price of pepper from Brazil will continue to increase in the near future when the local currency tends to appreciate quite strongly against the USD

(in contrast in 2019/2020).

 

With both the current Indonesia / Brazilian markets and max quantity of 2 these market for export around 50 - 60.000 tons for second half of the year 2021. The ability to import for re-production and export is not feasible in Vietnam now. Therefore, all Vietnam exporters / processors / traders will have to focus on buying domestic raw material for export.

 

 

SPOT market in ASIA & USA & EU; Material at the ports of destination continuously increase in price due to the increase rapidly in freight rates, consumption… This will also promote the price of raw materials in exporting countries to continue to firmer in the near future.

 

CASSIA/ STAR ANISE/ TURMERIC;

 

High demand coming from different countries while new crops are still in the next 3 more months. Stock being tight and price continuing firmer / uptrend is foreseen until August at least.

 

 

The Impact of Ocean Freight to Pepper Market

We got this important information from the last RGB Pepper Market Report

Since last year, deficiency in shipping containers alongside the growing port congestion issues have created an unfavorable impact and disruptions to all exporters particularly from Asia.

Routes that are mostly affected are shipments bound to USA and EU ports with rates that are
now up of about 438%- 950% respectively from our last noted rates in June 2020.

If before large exporters were having an advantage to plan shipments ahead of time with contracted rates
from carriers, nowadays situation is completely distorted. The reportedly China’s aggressive tactics to bring back empty containers became even more challenging for USA/EU exporters.

Europe specifically Hamburg port is having a severe congestion issue with major carriers that are now
compelled to re-route containers to other available EU ports such as Bremerhaven and Wilhelmshaven as end of carriage obligation.

The desperation to export goods abroad often leads seller to commit and booked premium rates just to
acquire containers. Current situation for June: Another GRI rates implementation on June 15 with a critical space availability on the demand that is currently exceeding the current supply.

Specifically in Brazil freight rates where little affected if any, until now, but it started increase from the beginning of this month.
Routes and availablity of vessels and containers where altered already before, with changes happening on already contracted and booked vessels and ports, causing delays and dificulties to plan shipment and arrivals.

 

 

 

PEPPER=WORLD MKT PRESENT SITUATION

 

According to the Customs data, in May 2021, Vietnam exported 27,963 tons, less 7.9% compared to May 2020. In the first 5 months from January 1^st to May 31^st , 2021 Vietnam has exported 121,338 tons with a turnover of $ 379.6 million, compared to the same period in 2020, the export volume decreased by 17.1%, but the export turnover increased by 23.0%.

 

-       The Americas with an increase in imports in the first 5 months reached 27,398 tons, up 0.4% over the same period. The US is the largest import market from Vietnam with 24,636 tons, down 0.4%.

 

-       Africa's imports down by 38.4%, of which Egypt decreased by 48.4% from 6,035 tons to 3,114 tons.

 

-       Asia's imports decreased by 25.1%, of which China was the second largest import of Vietnam, down 29.4% to 23,657 tons compared to the import volume of 33,508 tons in the same period. Some other markets also a decrease in imports such as India, the Philippines, Thailand, Saudi Arabia, Bangladesh and increased imports in the United Arab Emirates, Korea, Iran, Japan ​..​.

 

-       European imports decreased by 4.1 % from Germany, Russia, Poland, Ukraine, Israel... Import volume increased in the UK, France, Ireland, Italy​..​. 

 

Based on the data pepper import and export situation in the past 3 years from 2018 - 2020. Let's look back and predict the possible scenarios in the coming time from June - December 2021;

 

 

No	Countries	2018	2019	2020	Average Quantity last 3 years	Imported First 5M 2021	Need cover  from June to December 2021
1	China	34,439	57,523	56,050	49,337	23,657	25,680
2	America	44,140	49,346	54,991	49,492	24,636	24,856
3	United Arab	9,781	10,359	13,040	11,060	7,317	3,743
4	India	20,441	20,039	12,598	17,693	5,984	11,709
		108,801	137,267	136,679	127,582	61,594	65,988

 

No	Countries	2018	2019	2020	Average Quantity last 3 years	Imported First 5M 2021	Need cover from June to December 2021
1	Other Market	121,533	147,252	148,613	139,133	60,198	78,935
							78,935

 

Which scenario will be happening?

 

Section	Scenario 1	Scenario 2	Scenario 3
Carryover (stock last few year 2019 – 2020)	50,000	40,000	40,000
Crop 2021	230,000	200,000	170,000
Total Import 2021	30,000	30,000	30,000
Exported in first 5 months	121,000	121,000	121,000
Domestic consumption	10,000	10,000	10,000
Lost weight when process white pepper	10,000	10,000	10,000
China / USA / UAE / INDIA need cover next 7 months	65,988	65,988	65,988
Other market need to cover from June to Dec 2021	78,935	78,935	78,935
Quantity available for next 7 months for other market	24,077	-15,923	-45,923
Possibility	50% ?	50% ?	0%

 

Whatever the scenarios happen or another scenario has not been mentioned. However, we can clearly see that the inventory volume of 2021 will decrease sharply and is expected to continue to decrease in 2022. Therefore, selling pressure from households / agents and exporters as very low will make pepper prices trend to continue to stabilize / increase in the short and medium term.

 

 

 

 

Pepper prices last week kept increasing momentum due to quite good demand from China and other countries such as the USA / EU / ASIA, especially big demand from Nepal / India. Although the situation of freight rates continues to increase and it is difficult to get containers along with the epidemic, it is still complicated. Rising freight rates have pushed raw material up. However, pepper prices still maintained a very strong upward momentum despite the above difficulties. The US and EU have gradually returned to normal activities, which has boosted consumption demand. The SPOT market in the US and EU were also recorded with a strong increase in demand in the past week.

 

 

IMPORT COUNTRIES IN FIRST 5 MONTHS

 

 

No	Countries	First 5M	First 5M	2021					TOTAL	+/- %
		2019	2020	JAN	FEB	MARCH	APRIL	MAY		21/20
1	America	22,734	24,724	3,962	3,686	6,285	5,367	5,336	24,636	-0.4
2	China	36,038	33,508	2,756	1,403	7,347	7,425	4,726	23,657	-29.4
3	United Arab	6,070	5,424	1,098	657	2,125	1,994	1,443	7,317	34.9
4	Pakistan	6,906	6,261	363	418	2,758	1,701	1,078	6,318	0.9
5	India	12,365	7,517	767	891	1,341	1,107	1,878	5,984	-20.4
6	Germany	5,631	5,892	568	546	623	1,931	1,245	4,913	-16.6
7	Netherlands	3,949	3,380	585	271	928	760	892	3,436	1.7
8	Egypt	4,185	6,035	192	162	836	1,336	588	3,114	-48.4
9	Korea	2,951	2,742	290	191	522	901	1,009	2,913	6.2
10	England	1,883	2,443	543	387	534	696	471	2,631	7.7
11	Philippine	2,642	2,510	500	275	430	480	603	2,288	-8.8
12	France	720	1,254	50	361	411	715	671	2,208	76.1
13	Russia	2,095	2,902	274	219	414	571	708	2,186	-24.7
14	Turkey	1,896	2,099	241	303	412	789	375	2,120	1
15	Thailand	3,234	2,859	530	154	539	351	435	2,009	-29.7
16	Iran	2,990	1,835	349	265	355	458	554	1,981	8
17	Ireland	3,320	661	155	359	498	59	900	1,971	198.2
18	Canada	1,205	1,325	273	223	414	344	353	1,607	21.3
19	Japan	1,165	1,327	324	149	303	423	247	1,446	9
20	Poland	1,044	1,652	45	222	325	481	234	1,307	-20.9
21	Saudi Arabia	1,860	2,045	241	86	456	356	114	1,253	-38.7
22	Australia	861	825	282	202	253	189	316	1,242	50.5
23	Spain	1,124	1,148	202	147	168	410	194	1,121	-2.4
24	South Africa	1,433	1,012	284	157	273	260	126	1,100	8.7
25	Senegal	1,496	1,631	263	302	28	109	294	996	-38.9
26	Ukraine	660	819	51	49	72	252	261	685	-16.4
27	Bangladesh	478	1,069	69		309	213	75	666	-37.7
28	Israel	1,170	1,212	72	27	277	131	151	658	-45.7
29	Taiwan	450	491	52	66	123	286	126	653	33
30	Malaysia	658	509	84	93	122	144	178	621	22
31	Vietnam	202	300	98	35	84	76	279	572	90.7
32	Gambia	512	765	207	124	28	152	43	554	-27.6
33	Italy	409	372	31	48	142	57	186	464	24.7
34	Mexico	236	492	28	40	123	67	134	392	-20.3
35	Singapore	493	626	7	40	132	68	130	377	-39.8
36	Greece	324	473	116	25	41	117	44	343	-27.5
37	Ghana	54	167	28	83	84	56	28	279	67.1
38	Kazakhstan	268	179		66	104	52	49	271	51.4
39	Tunisia	225	409			77	68	106	251	-38.6
40	Sudan	256	546				27	218	245	-55.1
41	Algeria	404	919		81	50		108	239	-74
42	Mauritania	279	167	127	28	54		28	237	41.9
43	Croatia	65	195		25	72	118	17	232	19
44	Belgium	119	178	59		58	58	35	210	18
45	Guinea	207	126	43	28		98	14	183	45.2
46	New Guinea		654	55	96		31		182	-72.2
47	Kuwait	274	259	32			54	95	181	-30.1
48	New Zealand	174	204	48	16	71	9	30	174	-14.7
49	Syria	294	279	17	71	28	55		171	-38.7
50	Bulgaria	152	311	15			95	52	162	-47.9
51	Iraq	201	528		16	55	63	28	162	-69.3
52	Guatemala	85	69	25	23	25	46	40	159	130.4
53	Oman	238	188	43	43	42	27		155	-17.6
54	Latvia	90	202		58		60	25	143	-29.2
55	Finland	189	130	7	15	33	49	33	137	5.4
56	Sweden	218	227	10	35	84		3	132	-41.9
57	Qatar	167	286	47		10	30	43	130	-54.5
58	Yemen	437	357			15	98		113	-68.3
59	El Salvador	121			3	27	52	27	109	100
60	Lithuania	125	138				79	14	93	-32.6
61	Hongkong	91	46	25		23	26	15	89	93.5
62	Nepal	3,288	3,826				16	73	89	-97.7
63	Afghanistan	16				27	61		88	100
64	Libyan	122	192	30	56				86	-55.2
65	Venezuela	36	18	16			20	48	84	366.7
66	Morocco	793	241	18	25		35		78	-67.6
67	Nigeria	54	47	1	25		28	23	77	63.8
68	Lebanon	176	116			51	25		76	-34.5
69	Bahrain	95	136	38		11	11	16	76	-44.1
70	Dominica	45	14	5		12	21	36	74	428.6
71	Indonesia	355	119	11	15	22	12	10	70	-41.2
72	Georgia	144	122			42	12	15	69	-43.4
73	Romania	156	215	22	16			28	66	-69.3
74	Jamaica	111	101	17	25			17	59	-41.6
75	Argentina		29	5			24	25	54	86.2
76	Chi Lê	56	274		9	30	13		52	-81
77	Norway	24	61	12		13	13	13	51	-16.4
78	Uzbekistan		52					50	50	-3.8
79	Mali	28					50		50	100
80	Hungary	24	50	17				29	46	-8
81	Estonia	69	104	11		17		10	38	-63.5
82	Panama	38	162	5		18	9	5	37	-77.2
83	Costa Rica	31	32	15		19			34	6.3
84	Reunion	18	37		17			17	34	-8.1
85	Peru	29	8	6		20		1	27	237.5
86	Djibouti	1	15			27			27	80
87	Kenya					27			27	100
88	Slovakia		125		25				25	-80
89	Azerbaijan		11				25		25	127.3
90	Angola		5	24					24	380
91	Guyana	21						21	21	100

 

Regarding VPA data, in the first 5 months of 2021, Vietnam imported 16,357 tons, of which black pepper reached 12,026 tons, white pepper reached 4,331 tons. Compared to the same period in the first 5 months of 2020, the import volume increased by 28,9%. Indonesia – 5,982 tons, Brazil – 4,498 tons and Cambodia – 3,228 tons are the 3 largest pepper exporting countries to Vietnam. Compared to the same period in 2020, imports from Indonesia increased by 35,8%, from Cambodia increased by 84,4%, but imports from Brazil decreased by 14,6%.

 

 

No	Countries	First 5M	First 5M	2021					TOTAL	+/- %
		2019	2020	JAN	FEB	MARCH	APRIL	MAY		21/20
1	Indonesia	10,754	4,404	1,878	365	1,088	1,511	1,140	5,982	35.8
2	Brazil	8,843	5,267	1,186	1,113	1,027	645	527	4,498	-14.6
3	Cambodia	1,245	1,747		126	480	775	1,847	3,228	84.8
4	Other	1,070	1,272	522	123	235	267	1,502	2,649	208
	Total	21,912	12,690	3,586	1,727	2,830	3,198	5,016	16,357	28.9

 

CASSIA/ STAR ANISE/ TURMERIC;

​Last week we saw a very strong demand for cassia from USA / EU / ASIA that pushed the price up from 75 - 150 USD each grade. Currently, whole cassia are almost out of stock and it is forecast that the price of cassia will continue to increase in the near future.​