2020 is a tumultuous year for domestic and international pepper markets.
Pepper prices increase
The price of pepper in Vietnam – the world’s largest pepper producer – enters 2020 at about 36,000 – 39,000 VND/kg, lower than the production cost. However, in mid-2020, the price skyrocketed to over 60,000 VND/kg due to strong buying by international customers. Although that high price did not last long, by the end of 2020, the domestic pepper price was only about 53,000 – 56,000 VND/kg, but that increased by about 13,000 – 14,000 VND/kg compared to the end of 2019.
In other major producing countries, prices tend to be similar. In Malaysia, pepper price last year increased by about 25%, according to which Kuching white pepper grade 1 increased from 13,500 ringgit/ton at the beginning of 2020 to 16,000 ringgit/ton at the end of 2020; while the price of black pepper increased similarly from 7,500 ringgit to 9,050 ringgit, according to data from the Malaysian Pepper Association. Although it is far from the record highs of RM50,000/ton white and RM30,000/ton of black in 2016, the increase in 2020 has been a great success for the pepper industry after three consecutive years of decline.
Output decreased
In 2020, pepper production of key producing countries in the world generally decreased due to the previous low prices that made pepper growers not interested in investing in this crop. Meanwhile, some places affected by natural disasters, such as in Vietnam, also seriously affected the pepper season. Pepper production of countries in 2020 will decrease by about 15% to 35%, more than the decrease in consumption (down by 5% to 10%) due to isolation measures against COVID-19.
The International Pepper Committee (IPC) estimates Brazil’s pepper production in 2020 at 78,000 tonnes, down 2.5% year-on-year, although still 16% above the five-year average. The 2020 pepper harvest in Indonesia was delayed due to COVID-19-related disruptions and heavy rains during the growing season, causing production estimates to fall well below the 78,000 tons of the country.
2019. Sri Lanka pepper output in 2020 is also only about 20,000 tons. India’s production last year increased slightly, to about 65,000 – 70,000 tons, compared with 50,000 – 55,000 tons in 2019, helping pepper imports into the country increased by only 2.56% over the previous year, to 22,071 tons.
Vietnam’s pepper production in 2020 is estimated at 240,000-260,000 tons, down from about 300,000 tons in previous years.
In that context, Vietnam’s pepper exports in 2020 increased slightly compared to 2019, because the COVI-19 epidemic in Vietnam is well controlled, trade activities are more favorable than other pepper exporting countries.
According to preliminary data of the General Department of Customs, in 2020, the whole country exported 285,292 tons of pepper, worth 660.57 million USD, the average price was 2,315.4 USD/ton, up 0.4% in volume but decreasing. 7.5% in turnover and 7.8% in average price compared to 2019.
However, a positive signal is that pepper exports in the last months of the year tend to increase, both in volume and in value. Specifically, exports in December 2020 reached 20,742 tons, equivalent to 57.4 million USD, the average price was 2,503.9 USD/ton, both in volume and in turnover increased compared to the previous few months.
Exports to the US – a market that accounts for nearly a quarter of Vietnam’s total official pepper exports, increased slightly in both volume and value, contributing to an increase in total pepper exports, although exports to some Other important markets such as India, Southeast Asia, UAE… fell sharply. Exports to the US in the past year reached 55,765 tons of pepper, with a turnover of 660.57 million USD, priced at 2,315.4 USD/ton, up 8.2% and 1.1% respectively over the previous year, the price decreased by 6.6. %.
Among the decreased export markets, it is noteworthy that exports to India only reached 12,345 tons, with a turnover of 28.27 million USD, down 39.2% and 42.7% respectively over the same period last year.
Many bright and dark areas in the pepper market picture 2021
The outlook for the world pepper market in 2021 is likely to continue the trend of 2020: output decreases and prices increase slightly.
Malaysia’s pepper output in 2021 is forecast to continue to decrease compared to the previous year due to poor investment and lack of labor force; Sri Lanka’s production is forecast at about 37,000 tons; Indian pepper production is forecast to decrease due to adverse weather.
According to the Vietnam Pepper Association (VPA), our country’s pepper output this year may decrease by 25-30% compared to 2020 to about 168 – 180 thousand tons. Specifically, in Bu Dop district (Binh Phuoc) sharply decreased when the number of old pepper gardens occupied most of the area. In Dak Nong, which is considered the area with the largest pepper area in the country, the yield decreased by 15-20%. Especially in Buon Ho town (Dak Lak), the death rate is not less than 50%.
It is too early to forecast the pepper market in 2021. However, many factors of 2020 are expected to continue into this year. The COVID-19 epidemic is still complicated, many countries have to continue to implement isolation measures, the global restaurant industry is still stagnant, affecting world pepper demand. In particular, the epidemic in markets such as the US, Europe, and China will greatly affect Vietnam’s pepper exports, because these are the main export markets.
In terms of trade, the epidemic has also made pepper trade difficult, due to a shortage of containers and congestion at seaports.
In terms of production, although the output of Brazil and Cambodia tends to increase, the output of other major producing and exporting countries such as Vietnam, India, Malaysia… is forecast to decrease. Due to the epidemic and many other factors, rising labor costs put more pressure on the pepper industry. Currently, labor costs in Vietnam range from 200,000-230,000 VND/work/day. With this cost, the pepper price is about 54,000 VND, pepper growers are almost not profitable, making them not motivated to invest in this crop.
In general, if the situation of low prices persists for the next few years, after about 2-3 years, the global pepper market will shift from oversupply to undersupply. IPC estimates that the world’s current pepper demand is estimated at about 400,000 tons/year, while the supply is about 500,000 tons/year, which is about 100,000 tons of surplus.
