Pepper prices “deviate” from the rules, increasing and decreasing rapidly

Over the past week, domestic pepper prices have continuously increased and suddenly decreased sharply. Immediately after the price increased sharply and reached 205,000 VND/kg – a level considered the peak in the past 8 years, domestic pepper prices dropped sharply in just a very short time. This not only makes traders and farmers “headache” with the problem of selling or storing, but also makes many export businesses worried and more cautious in buying and selling.

Explaining the reason, the Vietnam Pepper and Spice Association (VPSA) said that because businesses lack goods for export, they increase purchases in a short time, causing prices to increase dramatically.

According to industry experts and pepper purchasing agents, the current “hot” increase partly comes from Chinese traders starting to buy pepper again after a long absence. Meanwhile, the large amount of pepper smuggled into the market by businesses and speculators during the time of peak prices may be one of the reasons for the shock price decline.

Domestic pepper prices have continuously increased and suddenly decreased sharply.

Many experts and export businesses believe that this year’s pepper price rules are not the same as those seen in previous years. Looking back at the history of the pepper market, it has gone through many cycles of ups and downs in prices. The price upswing cycle of pepper usually lasts from 8 to 10 years and it is predicted that the price will reach its peak and will be higher than the previous cycle. They believe that this time is considered a shortage of supply because Vietnam – the country that supplies up to 50% of global pepper – has finished its crop since March, while Brazil has not yet started its crop, Indonesia and Malaysia are starting their crop around May. 7. Lower supply than demand is the reason why the price trend is increasing in all markets, not just Vietnam.

According to the Ministry of Industry and Trade, the sudden increase or decrease in prices is the result of “overheated” speculation. At the same time, the increase in pepper prices can trigger a part of pepper growers and agents to release pepper reserves from other seasons to the market. Moreover, currently, with the increase in prices on the world market, domestic pepper prices are still lower, so many small dealers are taking advantage of this opportunity to hold onto goods and push up prices.

Industry experts assess that a downward adjustment in pepper prices is necessary to “balance” the market. However, the price level is unlikely to fall deeply as pepper prices have entered a new upward cycle in the context of low global pepper supply but demand is increasing again.

What should businesses do?

Facing such a complicated situation and developments, Ms. Hoang Thi Lien – President of VPSA analyzed that with current export prices, the pepper industry firmly holds billions of dollars in hand. The decrease in the amount of exported pepper and high export prices are good for people, but for businesses, the profit earned is not necessarily equal to the rate of increased export prices, because businesses have contracts signed in advance and until the end. Now they just deliver. In the context of pepper prices changing daily and hourly, businesses cannot buy goods and it is also difficult to export.

Ms. Lien also said that, in the context of rising pepper prices, it is difficult for businesses to proactively source goods, and at the same time face double difficulties due to war, increased transport costs, trade risks, etc. Therefore, Harmonizing benefit sharing at this time is extremely important, so that all parties win.

At the same time, VPSA Chairman reminded businesses that adjusting input and selling prices is extremely important to avoid price risks. If domestic pepper prices increase, businesses need to adjust export prices accordingly. Otherwise, they will face reputational and order risks.

“When pepper prices rise too high, business enterprises must also be alert to anticipate the possibility of large price reductions in the future, thereby having appropriate management methods to avoid losses,” Ms. Lien added.

For pepper farmers, Ms. Lien said that speculation among the people needs to be viewed in a positive way. Maybe they have income from selling durian and coffee, instead of depositing money in banks with very low interest rates, with such a profit margin. They sell durian and coffee and buy several tons of pepper to store like a business. Previously, people did not buy pepper, but now they also go to channels to buy it. Everyone who has money can participate in the market and people’s participation is not excluded.

However, industry experts also warn that with pepper, prices may continue to increase, but farmers also need to look back at the lesson of many years ago: they should not find ways to sharply increase output beyond demand, causing prices to rise. deep decrease. Farmers should not massively expand pepper growing areas, but focus on investing and taking care of intensive farming so that pepper plants grow sustainably and stably. At the same time, be careful about hoarding speculative goods.

According to experts, in the long term, in the next 3-5 years, the amount of pepper produced cannot meet the world’s consumer demand. Therefore, Vietnam’s pepper industry still has many opportunities to “shine”./.