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Overview of Vietnam’s pepper industry

Overview of Vietnam’s pepper industry

Wednesday 27, 10 2021
Vietnam has risen to be the number one pepper-producing and exporting country in recent years. Vietnam’s pepper industry is considered to be potential with great prospects.

Vietnam’s pepper market overview

Accounting for about 55% of production and 60% of the global trade market share, pepper is a Vietnamese agricultural product that now leads the international market.

In 2017, the pepper cultivation area reached 152 thousand hectares, an increase of 22.7 thousand hectares compared to 2016. Of which, the Central Highlands that took up 94,356 ha and the Southeast with 49,493 ha are the two regions with the largest pepper area in the country.

Pepper output

Pepper output in 2017 reached 241.5 thousand tons, up 25.1 thousand tons. Pepper exports in 2017 reached about 230 thousand tons, the value was estimated at 1.11 billion USD, down 21% compared to 2016.

Vietnam is now the world's largest pepper producer with 40% of output, exporting to 110 countries. In 2020, although the COVID-19 pandemic greatly affected export activities, pepper exports remained stable, output reached 285,000 tons.

Challenges in Vietnam's pepper industry

Despite being ranked number one in the world, pepper production in Vietnam is still unstable and unsustainable. The cultivation area of pepper expands too fast, even to unsuitable areas. During high selling price periods, there has also been too intensive farming.

In addition, there has not been an effective method against the diseases on pepper plants, namely quick and slow wilt. There are other drawbacks that lead to the instability of pepper production, such as the breeding work is still limited, the selection and recognition of leading varieties have not yet received enough attention, etc.

pepper production

Vietnam’s pepper exporting is also facing many difficulties, having to compete with pepper produced from Brazil and India. The COVID-19 pandemic also affected pepper export volume to the American and European markets.

Industry outlook

After a five-year cycle of fluctuations in the downward direction, pepper prices are gradually recovering in 2021.

The rising price of pepper has created motivation for pepper farmers and revived Vietnamese pepper processing and exporting enterprises. This heralds a brighter future for Vietnam's pepper industry after a difficult period of volatility.

A representative of the International Pepper Association (IPC) said that the global supply of pepper was declining due to a decrease in production areas. That pushed up pepper prices because consumer demand did not decrease in line with its supply.

International Pepper Association

In addition, climate change in recent years has adversely affected the growth of pepper plants. Quick and slow wilt diseases still occur on pepper trees, and pepper care is becoming more difficult. These resulted in pepper yield decreasing.

The price of pepper has increased in the past few months of 2021, helping farmers to be excited because after the time of storing pepper, it is finally the time to sell and increase profits, and businesses will also be revived after a period of laying low.

Mr. Nguyen Van Lam, the representative of Nedspice Vietnam Spices Processing Company Limited, said that the increase in pepper prices was due to market adjustment. It was not what businesses or farmers can self-regulate.

The recent increase in pepper prices is good news for Vietnam's pepper industry. Also, because of the sharp decrease in the supply of pepper,  the oversupply problem would no longer be a concern at the moment.

However, Vietnam's pepper processing and exporting companies are under great competitive pressure from other countries because when pepper prices increase, there will be a phenomenon of competition to buy raw materials. Farmers and traders will race to store pepper, making it difficult for exporters to supply and sign long-term orders.

Mr. Nguyen Van Lam said businesses could only sign short-term export orders to be able to cope with fluctuations in the price of raw pepper, avoiding the risk of further price fluctuations.

At the same time, with this response, businesses will be able to earn higher profits to continue exporting when the market adjusts continuously.

Therefore, Vietnamese pepper processing and exporting enterprises need to have flexible response plans to take advantage of fluctuations in pepper prices.

With the current price increase of pepper, Vietnam's pepper industry with great development potential is motivated to return to its billion-dollar export position as it was five years ago.

 

Compiled by VietnamCredit

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