Vietnam’s Black Pepper in 2023: Export Volume Surge, Value DIp, and Global Impacts

Whole Black Peppercorn

Vietnam

Market & Price Trends

Published Aug 10, 2023

In 2023, Vietnam's pepper industry experienced significant shifts in both export volumes and values. The first half of the year saw a 26.6% year-on-year (YoY) increase in black pepper export volume, reaching 153,000 metric tons (mt) worth USD 483.2 million. However, there was a simultaneous 11% YoY decline in export value, possibly due to shifting market demand and currency exchange rates. Notably, China and the US stand as key players, with China's strategic stockpiling driving a staggering 170 % YoY surge in Vietnamese black pepper exports in terms of volume. In comparison, the US experienced a 16% YoY decrease attributed to economic conditions and interest rate increases. Vietnam's 2023 pepper harvest was expected to have a 9.3% YoY output increase, but challenges arose from adverse weather conditions. Despite these, Vietnam's black pepper exports remain resilient, primarily influenced by Chinese demand. Amidst global production fluctuations, including Brazil and Indonesia's anticipated decrease in output, potential supply constraints are predicted to increase global pepper prices.

Vietnam’s pepper industry has witnessed notable dynamics in 2023, with significant shifts in export volumes and values. In the first six months of 2023, Vietnam's pepper exports reached 153,000 metric tons (mt), worth USD 483.2 million, reflecting a 26.6% year-on-year (YoY) increase in terms of volume. Despite this volume growth, there was a decline of 11% YoY in export value over the same period. This could be attributed to factors such as market demand changes or currency exchange rate shifts.

Source: Vietnam’s General Statistics Office

The key market destinations for Vietnam's black pepper are China and the United States (US), accounting for 35% and 16% of the total pepper export volume for H1-2023, respectively. China has consistently purchased large amounts of Vietnamese pepper. The surge in Vietnamese black pepper exports to China significantly increased by 170% YoY to 46,169 mt in H1-2023. The increase in export volume can be attributed to China's strategy of stockpiling black pepper for their domestic market.

On the other hand, US imports of Vietnamese black pepper dwindled by 16% YoY to 21,093 mt during the first half of 2023. The demand is weak since high inflation still lingers in the US market, causing consumers to tighten their spending. In addition, in late Jul-23, the US Federal Reserve (FED) raised interest rates by 0.25 percentage points to 5.5%, the highest level observed in the past 22 years. This adjustment might affect importers who rely on loans to buy goods. The higher borrowing costs could lead to reduced purchasing power and subsequently decrease the demand for black pepper imports.

Looking ahead, the export volume surge to China, driven by the country’s stockpiling strategy, is likely to continue as its domestic demand has remained strong. However, the decline in Vietnam’s black pepper exports to the US due to economic conditions and the increase in interest rates could lead to a more cautious approach from US importers.

The Vietnam Pepper and Spices Association (VPSA) reported that Vietnam's pepper harvest for 2023 concluded in May with an estimated output of nearly 200,000 mt, representing a 9.3% YoY increase. However, early August brought unexpected challenges due to prolonged heavy rains in the Central Highlands and Southern provinces, causing concerns about the yield and even potential failure of the next harvest in 2024. For instance, Bình Phước province, a key area for black pepper cultivation in Vietnam, experienced substantial rainfall, with precipitation reaching 273.3 millimeters (mm) in early August, significantly higher than 209.47 mm in the previous year.

Meanwhile, in other pepper-producing markets like Brazil, a 15 to 20% output decrease is projected despite being in the middle of the harvest season, causing farmers and dealers to increase hoarding and offer less to the market. In Indonesia, the 2023 black pepper production is anticipated to be approximately 55,000 mt, a 15% YoY decrease. This reduction can be attributed to Indonesian black pepper growers shifting towards more lucrative crops such as coffee. Vietnamese black pepper stock is expected to be depleted shortly in 2023.

The global outlook for black pepper output determines the production dynamics of major pepper-producing countries. The anticipated decrease in output from Brazil and Indonesia, coupled with the potential yield challenges faced by Vietnam due to adverse weather conditions, might tighten global supply. This reduced supply could put upward pressure on global pepper prices. The average export price of Vietnamese pepper in Jul-23 continued to increase by 2.1% month-on-month (MoM) compared to Jun-23, reaching USD 3,688/ton.

The Vietnamese black pepper export sector is poised for continued growth in terms of volume, mainly driven by the demand from China. The global pepper market is likely to be influenced by the supply dynamics across major producing countries, which could lead to price adjustments in response to changing availability.