Pepper exports since the beginning of the year have recorded a sharp increase compared to the same period last year. However, it is forecast that pepper exports in the near future will face difficulties as China continues the "Zero Covid" policy, and sea freight costs continue to stay at a high level.
Prices increased by more than 53%
According to statistics from the General Department of Customs, in the first 4 months of 2022, Vietnam's pepper exports reached 77.81 thousand tons, worth USD 362.73 million, down 16.6% in volume but up 28% in value, over the same period in 2021. The average export price reached USD 4,662 /ton, up 53.4% over the same period in 2021.
Information from the Vietnam Pepper Association shows that from the end of the fourth quarter of 2021, pepper prices continuously fluctuated between VND 80,000/kg and lasted until the 2022 Lunar New Year (February 7, 2022) before increasing to 86,500 VND/kg, the highest level since early 2022 in mid-February (February 17, 2022). After that, the price dropped back to an average of 1,000-2,000 VND per week. Prices decreased in the first quarter of 2022 due to coincided with the peak harvest of Vietnam and some other producing countries, the supply is quite abundant. Another reason for the price drop is that exports to China fell by 81% due to the border closure.
By early May 2022, the price of black and white pepper in the domestic market recovered thanks to China's opening to customs clearance. However, the recovery did not last long because speculators continuously sold out, while the demand of the foreign market at this time was not high. It is still the time of delivery and receipt of goods signed last year, so foreign customers have not signed a new contract.
For example, on May 18, 2022, the price of black pepper in the domestic market decreased from VND 2,500 to VND 3,000/kg compared to April 28, 2022, to VND 73,000– VND 76,500 /kg. The price of white pepper is at VND 114,000/kg, down VND 3,000/kg compared to the end of April 2022, but still higher than the VND 100,000/kg in the same period in 2021.
“Increases again of pepper price or not depends on the purchasing demand of the Chinese market," said a representative of the Vietnam Pepper Association.
Although the value and export price of pepper increased sharply in the first four months of the year, the Vietnam Pepper Association acknowledged that fertilizer prices have nearly doubled over the past year, along with labor and costs. Businesses are equally affected when logistics prices continue to stand at high levels for many months. In addition, the application of the port fee collection of Ho Chi Minh City from April 1, 2022, further created the difficulties for enterprises.
Need to be careful in signing a contract
Vietnam's pepper production is expected to continue to face a disadvantage due to the impact of climate change along with objective reasons such as fever in land prices, fertilizer prices, and drug and labor costs. Meanwhile, the second largest pepper supplier in the world, Brazil, is still maintaining a good growth rate in both quantity and export value.
China's steadfastness in implementing the "Zero Covid" policy not only causes the domestic supply chain to break but also affects the price of Vietnamese pepper in the near future when exporting pepper to China. National forecasts continue to decline; at the same time, some pepper shipments that are stuck at the border gate may be sold back to Vietnam to cut losses, putting pressure on domestic pepper prices. In addition, shipping congestion may become worse after China's blockade and restrictions are eased because there will be an explosion in the volume of goods transported, thereby creating pressure for spot shipment cost.
“The pressure of petrol prices makes sea freight costs increased at a high level, causing many import-export enterprises to face difficulties, not to mention the situation of port jams and lack of containers still continuing. According to the latest announcement of shipping line ONE, from March 2022, the freight rate to Europe (about USD 7,300 per 20-foot container) will increase by USD 800 - USD 1,000. It is forecasted that from now until the end of the year, gasoline prices will still increase when the war between Russia and Ukraine is still tense. Therefore, businesses need to be careful in negotiating and signing contracts to avoid the risk of sudden increase in freight rates," said the representative of the Vietnam Pepper Association.
From a business perspective, sharing more deeply about the difficulties pepper enterprises are facing, Mr. Nguyen Nho Ly, Director of An Phong Dak Nong Co., Ltd and Chairman of Dak Song Pepper Association said that enterprises have weak potential and output difficulties. Enterprises find it difficult to access state support mechanisms and policies. Specifically, the project "Pepper is not just a seasoning" of An Phong Dak Nong Co., Ltd. is currently suspended due to difficulties in capital policies and mechanisms.
Talking about the plan to expand production according to American organic standards at 2-9 Dak Lak Import-Export One Member Company Limited (Simexco Dak Lak), Mr. Nguyen Tien Dung, Simexco Dak Lak's Sustainable Development Director, said that the current difficulty is that the area is fragmented and difficult to focus on assessment. The high increase price of the land makes farmers unable to maintain production and lack commitment in sustainable production. Meanwhile, the problem of residues for banned substances is still detected; toxic residues in the soil are still there.
Recognizing that state management agencies have not closely followed actual production; farmers cultivate spontaneously, chasing quantity; seed research is limited, Mr. Nho Ly said that there should be stronger support from the state in research on varieties. At the same time, mechanisms and policies for enterprises need to be loosened so that enterprises can access them.
"Enterprises also need support to strengthen linkages in the production of clean ingredients, improve deep processing, build brands, and connect businesses to consume output products," said Mr. Ly.
Source: VCN
Keywords: exports, enterprises, market, pepper
