"Burn hands" with pepper prices

Pepper prices adjusted very strongly.

Pepper prices on June 1 ranged from 130,000 - 131,000 VND/kg, but on June 13, pepper businesses and growers recorded the highest pepper price in more than 8 years when it climbed to more than 180,000 VND/kg, an increase of 50,000 VND/kg compared to the beginning of June 2024.

However, just one day later (June 14), pepper prices were adjusted down by 20,000 VND/kg, down to about 160,000 - 162,000 VND/kg.

"Burn hands" with pepper prices

The downward adjustment continued to be recorded in the following days, down to around 157,000 - 160,000 VND/kg. Notably, on June 26, pepper prices in the Southeast region dropped sharply to 145,000 VND/kg. Specifically, pepper prices in Dak Lak, Dak Nong, Gia Lai, and Binh Phuoc were purchased at 145,000 - 146,000 VND/kg.

After this sharp drop, pepper prices in some localities have slightly increased, recording on the last day of the month (June 30), pepper prices were in the range of 153,000 - 157,000 VND/kg.

Across pepper forums, experts say the recent fluctuations in pepper prices are due to an invisible 'hand' causing the price to drop.

There is a paradox that when pepper price reached 180,000 VND/kg, many pepper growers still refused to sell their products and waited for the price to increase further. However, when pepper price dropped to 145,000 VND/kg, many farmers were worried and pushed pepper into the market.

Overall, in June 2024, pepper prices increased by an average of VND23,000 - 27,000/kg. Although the market had two sharp price adjustments during the month, it still ended the second quarter of 2024 with prices exceeding farmers' expectations.

Previously, in May 2024, domestic pepper prices increased sharply, by an average of VND33,000/kg. In April 2024, domestic pepper prices increased by VND5,000/kg. Currently, supply is low, farmers are holding pepper, causing traders and businesses to increase prices sharply to buy and then reduce prices deeply to speculate. Agents holding farmers' goods are now turning to squeeze prices to force farmers to close their deals early.

According to the Vietnam Pepper and Spice Association (VPPA), the scarcity of supply has pushed pepper prices up "hotly" in recent times. On the other hand, in June, the global pepper supply still depends on the amount of goods from Vietnam while the harvest in other countries has not yet begun. This helps Vietnamese pepper prices maintain a good upward momentum every month of the second quarter of 2024. In addition, it is impossible to mention speculative activities that have pushed prices up in recent times.

It is forecasted that the increase in pepper prices will slow down, but will still remain high due to limited supply and increased demand. In major pepper producing countries such as Brazil, Indonesia and Vietnam, this year's crop output is forecast to decrease. According to statistics from the Ministry of Agriculture and Rural Development, Vietnam's pepper growing area in 2023 will reach 120,000 hectares, with an output of 190,000 tons. It is estimated that pepper output in 2024 will continue to decrease to 170,000 tons, the lowest level in the past 5 years.

Experts advise that in the medium and long term, the upward trend of Vietnamese pepper prices is clear, however, the market is being heavily influenced by speculative activities, so farmers who are still storing pepper should consider and be cautious in selling when needed, avoiding selling based on rumors.

Still facing many difficulties

The increase in pepper prices has made it difficult for businesses to purchase to pay for previously signed export orders. In addition, there are difficulties in transportation as many containers are stuck at ports and cannot move, partly due to ships heading to China to concentrate on exporting goods to the US before August 1, to avoid being imposed anti-dumping taxes by the US, leading to congestion at Singapore and Chinese ports, causing a shortage of ships in many places, pushing up freight rates. In addition, conflicts in the Red Sea have also made transportation more difficult.

Exporters commented that the situation of shipping to Vietnam's key export markets is very tense. The most serious is the shipping route to Europe, where freight is both expensive and there are no seats available. Currently, freight rates are 60-70% higher than at the beginning of the year.

High freight rates have pushed up Vietnam’s pepper export prices this month. Although the export volume has decreased compared to the same period last year, the value has increased sharply, making it likely that the pepper industry will achieve its billion-dollar export target this year. However, exporters say that the net profit they earn is not much.

The sharp increase in pepper prices since the beginning of the year has brought joy to pepper growers, but has put many agents at risk of heavy losses. Because usually at the beginning of the pepper season, after harvesting, people will often consign pepper to purchasing agents with the mentality that if they store pepper themselves, they will lose volume. And when they need money, they will go to the agent to close the sale and collect the money. Meanwhile, purchasing agents who keep goods for farmers often take advantage of the consigned pepper to create other cash flows.

Mr. Le Duc Huy - General Director of Dak Lak 2/9 Import-Export Company Limited (Simexco) - informed that the sharp increase in pepper prices in recent times has caused many businesses to face difficulties. Recently, the Government and associations have positioned Vietnam to become the kitchen of the world. Accordingly, Vietnam will become a country that produces consumer goods, packaged goods, and jarred goods for consumers to use immediately; instead of exporting raw materials as before. Therefore, when focusing on processing, we can import raw materials from other countries to make consumer goods, when domestic supply is not enough to meet the demand.

To create a healthy and effective pepper market, Mr. Le Duc Huy said that it is important that market participants (including farmers) reduce speculative thinking. Producers need to supply products to the market, keeping only a portion. Avoid the situation where producers borrow money to speculate and hoard goods. This is against the law of the market.

As for intermediary enterprises, they should do well their role as connectors, circulation, and avoid speculation. When people need money, they can buy at a good price, and when export enterprises need goods, they can supply them fully. Export enterprises need to do well their role in harmonizing the interests of all parties, not forcing anyone to lower prices. However, Mr. Le Duc Huy said that this is not easy. Because the market has many enterprises participating in the supply chain. Each enterprise has a different mindset and strategy and they always believe that they are right.

And the pepper market will still have to face unexpected developments as pepper supply is still facing a shortage.

Source: https://congthuong.vn/bong-tay-voi-gia-tieu-329287.html