High inflation in many countries around the world, China's "Zero Covid" policy is still the main obstacle for Vietnam's pepper industry. Source: Internet.

Quantity down, price up

According to the latest data from the Ministry of Agriculture and Rural Development, the export volume of pepper in October 2022 is estimated at 15,000 tons, worth 58 million USD, bringing the pepper export volume in 10 months in 2022 to 190,000 tons and 829 million USD, down 17 .4% in volume but up 4.7% in value over the same period in 2021.

The average export price of pepper in the first 10 months of 2022 is estimated at $4,372/ton, up 26.9% over the same period in 2021.

A representative of the Institute of Policy and Strategy for Agriculture and Rural Development (MARD) said that the largest pepper export markets of Vietnam in the first nine months of 2022 are the United States, United Arab Emirates and India, with 41.7% market share. The market with the highest increase in pepper export value is Japan with an increase of up to 98.8%. Meanwhile, the export market that dropped the most was Pakistan with a decrease of 55.6%.

According to Hoang Thi Lien, President of the Vietnam Pepper Association, since the beginning of the year, pepper exports to most of the key markets have decreased, such as the US, EU, and Asia markets.

Of the above situation, inflation in the world market increased, and all consumption behaviors were adjusted, causing import output to decrease. This situation occurs not only with the pepper industry but also with many other export industries. “On the other hand, in 2019-2020, pepper prices in the world market dropped sharply, many big buyers bought reserve pepper and are now launching it on the market. This is also the reason for the decrease in imported pepper output,” said Lien.

A representative of the Institute of Policy and Strategy for Agriculture and Rural Development said since the beginning of the year, Vietnam's pepper exports have faced many difficulties and challenges due to the conflict between Russia and Ukraine, inflation was high in major consumer markets such as the US and EU. Meanwhile, exporting to China is also not favorable when the country continues to maintain the "Zero Covid" policy. In addition to the above factors, Vietnamese pepper is losing market share because the Brazilian and Indonesian markets offer more competitive prices.

Market demand decreases

According to the Ministry of Agriculture and Rural Development, the main factors affecting the pepper market in recent years such as high inflation in many countries around the world, China's "Zero Covid" policy and the appreciation of the US dollar compared to other countries in the world. Other currencies will still be the main obstacle for Vietnam's pepper industry in the last months of this year.

Not only difficulties in the late 2022 period, but information from the World Pepper Association also shows pepper demand is forecast to drop sharply in the first quarter of 2023 with especially difficult winters in Europe, due to the impending energy crisis.

The Import-Export Department (Ministry of Industry and Trade) forecasts that in the short term, world pepper prices will continue to decline due to a strong dollar when there is great expectation that the US Federal Reserve (FED) will raise interest rates. The Fed's continuous increase in interest rates to limit  inflation pushed the dollar to flow back into the United States. This caused many countries to be short of USD and forced to restrict foreign currency for importing non-essential goods, including pepper.

Currently, some countries such as Pakistan and Egypt, which have been Vietnam's major pepper export markets in recent years, are facing this situation. In addition, many central banks around the world simultaneously raised the basic monetary interest rate, which may push the global economic recession to become more and more serious. "Decreased consumption demand is still the factor that restrains the recovery of pepper prices in the following months, especially the two major pepper-consuming markets in the world, Europe and the United States," a representative of the Export and Import Department said.

The Vietnam Pepper Association proposes that Vietnamese Trade Offices abroad should further promote activities to support the trade promotion industry, develop import and export with foreign markets.

Besides the traditional markets, promoting pepper exports to markets that are not yet large of Vietnam's spice industry such as the Middle East and Africa is a positive direction.

According to Nguyen Thi Hien Giang, Director of Lam Thanh Hung Trading Co., Ltd, Middle East and Africa are considered potential markets for exporting spices. The reason is that the countries in this region have limit ed agricultural production and have to import many types of agricultural products, including spices.

On the other hand, locally produced spices are not directly competitive with Vietnamese spices. For example, in the Iranian market, this country annually consumes 220,000 tons of spices, of which more than 170,000 tons are imported. Due to the large number of imports, Iran is considered the distribution center of this product in the whole world.

Nguyen Thi Thu Thuy, Deputy Director of the Export Support Center, Trade Promotion Department (Ministry of Industry and Trade), noted that in order to boost pepper exports to new markets such as the Middle East and Africa, enterprises need to carefully research their partners before trading; be wary of deals that are too tempting.

"During the transaction, enterprises should pay attention to choosing the appropriate payment method such as money transfer method or collection method, etc., and should also seek the advice of legal experts and international payments,” said Nguyen Thi Thu Thuy.