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29/05/2020

VIETNAM PEPPER MARKET - TREND IS UP

Pepper market has continuously increased this month from VND 38,000 in early May to VND 48,500 at the present. Price increase was up to 28% within 25 days and up from the bottom of 35.5% (VND 34,500) within 2 months. A jump in prices is beyond the expectation of almost all pepper producers and exporters not only in Vietnam but also worldwide. The market increased last time mainly due to the following reasons;


After lock down due to the Covid-19 epidemic, Chinese customers returned to buy both black and white pepper in huge quantities (March and April bought above 20.000 tones and May is around above 10.000 metric tones) . In particular, white pepper is being bought by many and continuously.
Pepper was low level and is considered to have been at the bottom already (VND 34,500 - 1,510$), so many speculators actively bought huge quantities of stock. This also contributed significantly to the price increase last time.


Due to the Covid - 19, some countries producing and exporting pepper have been continuously restricted as harvesting, processing, freight forwarding, logistic service. This also makes pepper sometimes suddenly shortage in each different time.
At low prices and a lot of farmers making losses, many farmers have left and do not continue to take care of pepper as the previous time, besides the weather in the pepper areas is drought. Therefore, pepper production in 2021 is maybe less than the 2020 crop.


Many exporters sold short for long time shipments who have not covered raw material yet. They have to buy to ensure time of shipment.
Some big oversea customers have not yet purchased enough quantity for orders in the 3rd & 4th quarters, so they continue to participate in the market in the coming monh.
At present, the situation in Vietnam is controlling Covid 19 quite well. Transportation service, logistics smoothly and quickly. Therefore the oversea demand for spice products in Vietnam is gradually increasing.
Although the inventories of Vietnam pepper are still quite large, however, we assess that the pressure of circulation of these inventories is very low due to being scattered from farmers, middlemen, exporters ... They are not in a hurry to sell or be ready to freeze inventory if the market price decreases.
Even at this level many farmers/collectors still think attractive and they have been buying more quantity to stockpiling from last week until now.

Currently, it is almost the only Vietnam can supply a large quantity to the market while Indonesia and Brazil are offering very limited and not possible prompt shipment. Therefore, the demand for Vietnamese pepper is expected to continue to increase until next July at least (Indonesia harvests in July, Brazil harvests the second crop in August 2020).


Contrary to many other pepper exporting countries, Vietnam's currency has been consistently stronger than the USD with a 1% over the past week, that makes pepper prices also up.In my opinion, pepper prices will continue uptrend until the end of June/July. There will be some short-term corrections in July/August.

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