Pepper prices are expected to remain high.

Domestic pepper prices increased by more than 30%

As expected, domestic pepper prices have continuously increased. Specifically, pepper prices on March 10, 2024 in many localities in the Central Highlands ranged from 92,500 - 94,500 VND/kg. In the Southeast region, pepper prices today ranged from 94,500 - 95,000 VND/kg.

Thus, within just 3 months (since December 2023), pepper prices have increased by more than 30%. By the end of February, black pepper prices increased by 10,000 - 11,000 VND/kg compared to the end of January to 91,000 - 94,000 VND/kg. The highest level recorded in March was 96,000 VND/kg.

According to some businesses and experts in the pepper industry, recently pepper prices in many countries such as Brazil and Indonesia have often been higher than in Vietnam, and there were even times when Indonesia had no pepper to export.

In fact, at this time, only Vietnam is harvesting a lot. World prices are higher than domestic prices, and with the fear of shortages and price increases, many businesses have proactively increased their purchases, pushing pepper prices up.

Ms. Hoang Thi Lien - President of the Vietnam Pepper and Spice Association (VPSA) commented that pepper prices are entering an upward cycle. However, during the upward process, pepper prices will have a few downward adjustments before increasing again.

Not just in terms of supply and demand

The gap between supply and demand may cause pepper prices to continue to increase in the coming time. The decrease in pepper supply from Vietnam and major countries in the world has caused a deficit of tens of thousands of tons in the global market.

Mr. Jasvinder Singh Sethi - CEO of Namagro Vietnam Company said that through data synthesis and observation, there is a rule that has repeated three times in the past 50 years, that is, whenever demand is greater than supply, prices also skyrocket, conversely, when supply is greater than demand, prices will decrease and remain at the bottom.

Pepper prices are still stable and may increase in the coming time. Supply is still not enough to meet demand. However, for the pepper market, businesses should also note that it is not only necessary to assess supply and demand, but also to assess whether geopolitical conflicts in a region affect supply and demand in that region and neighboring areas.

Currently, global pepper consumption demand is about 600,000 - 700,000 tons. This demand is met through imports and domestic cultivation. Asia is the world's largest consumer of pepper with 400,000 tons, of which half is imported and the other half is produced domestically. America consumes 110,000 tons, of which 90,000 tons are imported from other countries, while Europe imports almost all of it.

According to the International Pepper Community (IPC), global pepper production will decrease by about 2% in 2024. Not out of the trend, Brazil's output will decrease more sharply due to issues related to climate change. Vietnam's pepper output may decrease to about 170,000 tons, but exports may still reach about 240,000 tons.

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

Yields depend on the weather and the motivation of the farmers themselves. In Vietnam, there have been no new planting areas since 2017, and in some areas farmers have switched to other crops. All of this will cause a shortage of supply in the future. In addition, El Nino, La Nina and geopolitical instability will further aggravate the situation.

According to experts, in countries with large pepper production, Brazil has passed the harvest season, Vietnam is now entering the harvest season, while Indonesia and Malaysia's main crop is in July every year. The supply from Indonesia, Brazil, Malaysia, and Cambodia is not enough to compensate for the decrease in Vietnam's exports, which will push pepper prices up right from the beginning of the season.

Meanwhile, Ms. Lien commented that the pressure of reduced supply will have a positive impact on prices. This creates motivation for farmers to invest more in pepper gardens.

According to estimates by 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, down 12.3% in volume, but up 12.9% in value over the same period in 2023; Vietnam's average pepper export price is estimated at 4,041 USD/ton, up 28.7% over the same period in 2023.

The increase in raw pepper prices is putting pressure on export businesses as all orders must be signed in advance. Many businesses also predict that 2024 will continue to be a volatile year for the pepper market, with pepper prices set to increase further.

In her recommendation to businesses, Ms. Hoang Thi Lien said that businesses need to adjust so that the import and selling prices have similar increases to avoid price risks. If domestic pepper prices increase, businesses need to increase export prices accordingly. If these two prices do not increase appropriately, businesses will have to bear the risk because they have to ensure their reputation and ensure orders. In addition, businesses can buy slowly, a little each day, avoiding too much rush, otherwise it will affect prices when there are large orders, creating more scarcity of goods.

Source