Strong Price Fluctuations for Vietnamese Dragon Fruit Due to Coronavirus

The congestion in the Chinese consumer market caused by the novel Coronavirus, also known as COVID-19, is causing ripples in the Vietnamese agricultural market. Vietnam is largely dependent on China for its agricultural and food exports - most notably rice, coconuts, dragon fruits, and seafood - and the slowdown of the Chinese demand has caused significant price decreases for affected products. Dragon fruits, in particular, have seen an over 80% price decrease due to the slowdown. Currently, however, prices are fluctuating wildly due to speculation.

Sharp Price Drop Despite Lunar New Year

Prices for dragon fruit, mostly exported to China and other Southeast Asian countries, usually rise around Tet holiday, Vietnamese lunar new year. Demand from the domestic market, as well as from abroad, rises immensely during this period as fruits, and especially dragon fruits, are an integral part of the holiday in East Asia. Prices for white-flesh dragon fruit usually double compared to the late winter months, up to VND 15,000 (USD 0.65), whereas prices for red-flesh dragon fruit - the most in-demand variety during this time - can go as high as VND 35,000 (USD 1.51).

However, this year the export gate to China was closed on January 30th as a result of COVID-19 and prices, which have been building up in anticipation of the lunar new year, decreased sharply. As China accounts for 80% of Vietnamese dragon fruit exports, the drop in demand decreased the prices for red-flesh dragon fruit by as much as 80%, to VND 5,000 (USD 0.22). White-flesh dragon fruit saw a more moderate price decrease to VND 10,000 (USD 0.43) as this variety also does well in the domestic market.

Increasing Value-Addition to Counter Loss

As the shelflife of dragon fruits is very short due to their high water content, it was almost impossible for many traders to find new export destinations before the dragon fruits would lose their freshness. Although Vietnam signed a Free Trade Agreement with the European Union recently, allowing for the export of dragon fruits into that market, the quality requirements for export to this market are higher than for export to China. The dragon fruits destined for the Chinese market were thus unable to be exported to the EU. The Vietnamese government established initiatives to ensure that the dragon fruits did not go to waste, by encouraging farmers to process their fruits into juices, bread, and purees.

Prices Increased, But For How Long?

Since the price drop in early February, Vietnamese dragon fruits have gone through wild price fluctuations with the re-opening of the Chinese market on February 14th. The prices offered by the Chinese traders ranged from USD 0.43 to 0.52 per kg, an increase of USD 0.17 - 0.22 compared to the previous week. Prices have increased even further since, by USD 0.64 - 0.86 per kg. Red flesh dragon fruit can now be sold for as much as USD 1.50 - 1.72 per kg. It is expected that prices will increase even more as a result of the returned demand from China.

As some traders in China are even reporting prices as high as USD 1.94 per kg, equal to prices before the Covid-19 outbreak, some traders have become skeptical whether the prices are set this high on purpose, to quickly sell out the stock and then push prices down again. It is unlikely that the prices will remain stable at these high levels.

Export Market Diversification Necessary

The outbreak of Covid-19 and the subsequent abnormal price swings have alerted Vietnamese traders, as well as the government, to the overdependence on the Chinese market for the export of their fruits. This is a recurring issue for Vietnam, as Vietnam has encountered export issues earlier in 2019 with coconuts due to overreliance on Chinese demand. The Vietnamese government has been trying to diversify export destinations as a result.

Already, the government has signed a deal with India to increase the export of dragon fruit, as well as pangasius fish and other affected products, effectively increasing Vietnam’s export markets. However, Vietnam needs to put more effort into raising the quality of their dragon fruits if they wish to export to more markets, especially now that the doors to the EU market have opened.