Pepper price can reach VND 90,000/kg by the end of the year

According to Mr. Hoang Phuoc Binh, Vice Chairman of Chu Se Pepper Association (Gia Lai), due to the Covid-19 epidemic, the world economy faced many difficulties, thus affecting and reducing the consumption of pepper. On the other hand, the epidemic disrupted the circulation of goods between Vietnam and other countries, causing the freight rates for shipping to Middle East countries, Europe, America... increase too high, 6-10 times higher than before.

Many businesses signed up for pre-sale at a low price of VND 40,000 - 55,000/kg, now they have to buy at over VND 70,000/kg for contract delivery, so they suffer heavy losses. Businesses not suffering losses have taken advantage to buy goods and fill up their warehouses when prices were still low. Therefore, currently, the cash flow is severely stagnated. That has led to the recent decline in pepper prices. Some agencies have taken profits or borrow hot money, so they have to sell quickly; many farmers at the end of the crop also need to sell some for necessary expenses… Therefore, pepper prices will not be high for a short while.

However, despite the ups and downs in price during this time, in general, pepper is still in an uptrend. The main reason is still the balance of supply and demand.

In a recent news release, the International Pepper Community lowered their forecast for Vietnam's pepper production volume in the 2021 harvest to 180,000 tons, down 40,000 tons from the previous forecast, and 60,000 tons lower than the 2020 production volume.

But according to the estimation of Mr. Hoang Phuoc Binh, who has surveyed most of the key pepper growing areas, the actual output in 2021 is only about 150,000 tons. Because in the past few years, pepper prices are already very low. The more they invest in pepper gardens, the more they lose, so the pepper garden owners have neglected to take care of them, stop investing, so many pepper gardens have been completely abandoned. By 2021, it is estimated that the harvested area will be less than half of the 2017 area (153,000 hectares). Moreover, adverse weather causes the trees to bear little fruits and thus the yield is drastically reduced. With the two factors above, it is estimated that pepper production in 2021 will decrease by over 30% compared to 2020.

Due to a sharp decrease in supply, the amount of pepper exported this year will also decrease significantly. According to the General Department of Customs, in the first 5 months of this year, pepper exports reached more than 121 thousand tons, down 17.1% in volume over the same period in 2020. Some pepper industry experts believe that the export volume of pepper this year is likely to be around 200,000 tons, much lower than the 285 thousand tons exported last year.

On the basis of the sharp decrease in supply, according to Mr. Binh, in the next few months until the end of this year, pepper prices will gradually improve and it is likely that by the end of the year the price will reach VND 90,000 - 100,000/kg.