Vietnamese Pepper Industry Set to Reach Billion-Dollar Mark Again

Vietnamese pepper is on track to re-enter the billion-dollar industry with an export turnover of at least $1 billion USD after being absent for several years.

The first half of this year has witnessed a remarkable surge in turnover for Vietnam’s pepper exports. The Vietnam Pepper and Spice Association (VPSA) projects that by the end of June 2024, Vietnam will have exported close to 143 thousand tonnes of peppers of various types, with white pepper making up nearly 17 thousand tonnes and black pepper reaching 126 thousand tonnes.

Vietnamese Pepper
Vietnam will have exported close to 143 thousand tonnes of peppers of various types

 

Although the quantity of pepper shipped in the last six months decreased by 6.8% compared to the same period the previous year, the export turnover increased by 30.5% to reach 634 million USD (black pepper accounting for 540 million USD, and white pepper for 94 million USD).

The average price of exported black pepper was 4,365 USD/ton in the first half of the year, while the average price of white pepper was 5,983 USD/ton. These prices were higher than those in May 6, 2023, by 922 USD/ton for black pepper and 1,028 USD/ton for white pepper.

Pepper prices remain relatively high in the domestic market. In Xuan Tho commune, Xuan Loc district, Dong Nai province, Mr. Dao Van Lanh, a pepper farmer, mentioned that the price of pepper in the area used to be as high as 180 thousand VND/kg and had remained at that level for several years. Prices dropped afterwards but did not decrease significantly. In early July, pepper prices in Xuan Loc surpassed 150,000 VND/kg, which is double the price from 2023. Mr. Lanh’s family has seen substantial profits from their pepper trees in the 2023–2024 season due to the significant price hike and their bold decision to store pepper to wait for higher prices before selling.

Pepper prices remain relatively high in the domestic market
Pepper prices remain relatively high in the domestic market

 

In the 2023–2024 crop year, the highest price of pepper traded on the domestic market was 180 thousand VND/kg, as reported by Mr. Hoang Phuoc Binh, Vice Chairman of Chu Se Pepper Association (Gia Lai). However, this peak price was short-lived, lasting only about a day, due to the urgency of businesses to meet export demands by purchasing pepper.

Currently, pepper prices are fluctuating, experiencing occasional ups and downs, but the overall trend is upward. Mr. Binh attributes this primarily to the depletion of Vietnam’s pepper supply caused by a significantly lower yield in the 2023–2024 season compared to the previous year.

Mr. Binh anticipates that pepper prices will remain elevated for several years to come, as historical data shows that price hikes tend to occur every decade, not just in the present year. Moreover, despite the high prices, it is challenging to quickly recover pepper output and cultivation area, as today’s pepper growers have learned from the consequences of the previous surge in prices.

A decade ago, when pepper prices soared to over 200 thousand VND/kg, farmers in various provinces expanded their pepper cultivation extensively, even in less suitable areas. This led to a significant increase in cultivation area and output, causing an oversupply situation that drove pepper prices down steadily, sometimes falling below production costs. Consequently, many farmers incurred substantial losses and had to either reduce their land significantly or transition to cultivating different crops or seeking alternative employment.

The global production of pepper will not be able to meet the increasing demand

 

The growth potential of pepper cultivation areas is further constrained by the high selling prices and attractive profits of existing durian, coffee, and other crops, which directly compete with pepper plantations in the Central Highlands. The scarcity of agricultural labor is increasing, and farmers are encountering difficulties in securing bank loans to support their investments in pepper cultivation. These are significant additional challenges that hinder the expansion of pepper cultivation areas in the near future, despite the rising prices of pepper.

As a result, despite the high prices, there has been no significant increase in the area dedicated to pepper cultivation in the provinces of the Central Highlands and Southeast Asia to date. Instead, farmers who are dedicated to their pepper plants are making strategic investments to enhance the production, efficiency, and quality of their existing pepper fields.

Due to the impact of El Nino, the availability of pepper is not only limited in Vietnam but also globally. In the long term, the global production of pepper will not be able to meet the increasing demand from consumers in the next three to five years.

With the strong growth momentum observed in the first half of the year and the consistently high export prices resulting from a supply shortage compared to demand, Vietnam’s pepper exports are projected to exceed $1 billion this year, marking the industry’s return to the billion-dollar category since 2017.

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