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Despite export output plummet, pepper export turnover down sharply due to surged price

On August 8, the Vietnam Pepper Association (VPA) held a preliminary review of the pepper and spice industry performance in the first 6 months of 2023 in combination with organizing a workshop to evaluate the EVFTA Agreement - Opportunities and challenges for the sustainable development of Vietnam's pepper and spice industry.

Export prices plunge

Mr. Le Viet Anh, Chief of Office of the Vietnam Pepper Association, said that by the end of June 2023, Vietnam exported 152,986 tons of pepper of all kinds, of which black pepper and white pepper reached 138,377 tons and 14,609 tons, respectively. Total export turnover reached 485.9 million USD, black pepper reached 417.9 million USD, and white pepper reached 68 million USD.

Compared to the same period in 2022, in contrast to an increase of 21.8% of export volume, export turnover recorded a decrease of 14.6%. The reason was the decrease in export prices, reaching only 3,484 USD/ton for black pepper and 5,011 USD/ton for white pepper, down by 879 USD and 1,070 USD respectively.

Mr. Le Viet Anh said that in the years 2021-2022, due to the influence of the Covid-19 pandemic, China's pepper imports have all decreased seriously. After reopening, in the first 6 months of 2023, China purchased more than 50,000 tons of pepper, helping to boost pepper prices from March to May, while demand in other major markets such as the US and Europe is still weak.

This has led China to become Vietnam's largest pepper export market in the first 6 months of 2023, accounting for 32.9% of export market share and growing to 798% over the same period in 2022. Meanwhile, exports to some traditional markets dropped sharply such as India down 41.1%, UAE down 29.3%, Pakistan down 25.9%, Korea down 54.2%... Export to the US market also decreased by 14%, reaching only 25,894 tons, accounting for 16.9% of export market share.

In the European region, exports also decreased by 10% to 26,963 tons. In which, most of the traditional markets such as Germany, Netherlands and UK all witnessed the downtrend of 30.4%, 22.3%, 12.9%, and 66.1%, respectively.

However, also in the EU market, exports to some countries reversed the trend such as the surge in some markets like Turkey up 102.2%; France by 31.2%… Exports to Africa reached 7,843 tons, up 17.1%, of which Egypt led by 51.1%, reaching 2,485 tons; Senegal with an increase of 77.4% to 1,763 tons…

Mr. Le Viet Anh assessed that the amount of Chinese goods purchased may be enough for domestic use in the short term, so the purchase demands in the near future may be fallen, making it difficult for pepper prices to rise again. Meanwhile, Indonesia and Brazil is starting the harvest. However, in general, the continuous decline in production over the past time in some countries, in which the crops of Indonesia and Brazil are forecasted to be lower than the previous year, has led to a decrease in global pepper stocks.

According to VPA, the export volume of pepper in the past 6 months showing that this year's volume is not much, it is expected that by the end of August, the output will be exported in 2023, which can be expected to have a positive impact on the market in the last months of the year. Besides, the World Bank's forecast for some economies such as the US, Europe and China has a positive outlook at the end of the year, so the purchasing power of pepper and spices of these markets will revival and could also impact prices between now and the end of the year.

Be careful with the risk

In the context of the market is still difficult, VPA recommends that businesses need to take full awareness of international trade. Accordingly, the status of transactions with signs of commercial fraud and fraud not only appears in Africa but also in Europe and especially in the Middle East market like Dubai recently with increasingly sophisticated tricks. Even senior partners are also being cheated, or swindlers often pay fairly for the first shipment but defrauds in subsequent shipments, with different exporters. Therefore, businesses need to be especially careful when dealing with partners, and closely negotiate payment terms to ensure the safest.

The association warned businesses about some risky payment forms such as postpaid payment method, which means that the buyer will receive the goods and then pay the seller. Another risky payment is check issuance which is valid for a certain period and then given it to the seller as a pledge. However, the seller may suffer danger from issuing check with no money in the account or the seller cannot go to the buyer's bank to receive the money because there is no identification card issued by the host country. The seller also cannot check the buyer's account information because banks in some Middle Eastern countries do not provide customer account information to third parties.

Therefore, VPA recommends businesses to choose safe payment methods such as opening L/C or the D/P payment method rather than postpaid and check payments. Exporting enterprises also need to note that the seller's banks when transferring documents to the buyer's bank must register the ensure safety service including taking photos and videos of the delivery process. Moreover, it is necessary to get a full signature and the recipient's identity card. At the same time, the delivery must happen in the bank's headquarters.

In addition, the exporter can also request its own bank to verify, assess the reliability and services of the buyer's bank, and confirm with the buyer's bank before sending the documents and detailed information about the address and recipient of the goods documents to bind the bank's responsibility attached to the documents in case of risks arising.