Pepper prices 2024: will the dream of 'black gold' repeat?

This year is the perfect time to look back at the glories and struggles of the pepper industry, writes Phan Minh Thong, general director of Phuc Sinh Group, a leading Vietnamese coffee and pepper exporter.

Pepper prices in Vietnam began to increase sharply in 2010, and reached their peak in 2015. At that time, it had become a billion-dollar industry, and when the price reached VND230 million ($9,040) per ton in 2015, everything seemed to explode. Everyone in the pepper industry was excited, from farmers and warehouses, to suppliers and exporters, everyone was talking about the miracle of pepper.

The price of gold at that time was about VND35 million ($1,376) per tael, and the forex rate was VND21,350 per $1. $9,040 per ton of pepper was equivalent to 6.5 taels of gold, or $10,700. At that time, everywhere we went, people were referring to pepper as "black gold".

I vividly remember a survey trip on the plateau, observing houses and fields where pepper was grown. Many farmers at that time stored three to five tons of pepper in their homes, hoping for the price to rise to VND250 million ($9,834) per ton before selling. However, the reality was harsh as pepper prices dropped rapidly afterward.

Pepper prices did not rise to $9,834 per ton but instead fell to VND200 million ($7,867) per ton, then VND180 million ($7,081), and by 2019, they plummeted to VND36 million ($1,416) per ton – a staggering 85% decrease in 3.5 years. During this time, Vietnam's pepper output peaked at nearly 300,000 tons, a record increase from 122,000 tons in 2015.

The drastic drop in pepper prices by 2019 to only $1,416 per ton caused significant hardships. Many who borrowed money to invest in pepper fields faced failure and bankruptcy. The abandoned pepper fields were a testament to shattered dreams, and discussions about pepper ceased.

Despite the despair, farmers continued to hold on, driven by hope, a vital force for perseverance and survival. After hitting bottom in 2019, pepper prices began to recover. Farmers and exporters, reminiscing about 2015's prosperity, continued to nurture and trade pepper, waiting for a turnaround.

In 2020, pepper prices started to rise again amid the Covid-19 pandemic in China. The trend continued through 2021 and 2022 despite the pandemic spreading to Europe and America. When the pandemic ended in 2023, pepper prices stabilized due to Brazil's significant inventory from 2022, which it began selling globally.

Before 2010, Brazil's pepper output was modest. However, rising prices between 2010 and 2012 spurred Brazilian farmers to increase production from 35,000 tons to 100,000 tons by 2021, intensifying competition with Vietnam.

Despite Brazil's increased output, their pepper was less popular worldwide. With the U.S. and Europe imposing restrictions, Vietnam emerged as the largest importer of Brazilian pepper. This was due to Vietnam's more advanced processing factories, allowing them to add value and sell processed products at higher prices, similar to their approach with Indonesian pepper. The notion of Vietnamese agricultural products being inferior has changed, particularly in the pepper and coffee industries.

In 2023, Brazil's pepper output decreased due to extreme weather, leading to a dramatic price increase. Brazilian pepper prices surged from $3,200 per ton to $4,700 per ton FOB within three months, and remained high.

International tourists flocked to Vietnam to buy pepper, driving Vietnamese pepper prices up. The hope of reaching VND100 million ($3,934) per ton in 2023 was alive, fueled by rising prices. Farmers aimed to sell at VND100,000 ($4) per kg, but as demand increased, prices went up.

Pepper plants are challenging to grow and require regular care. High prices encouraged farmers to invest time and money in their pepper fields, but low prices led to neglect.

In 2023, national pepper output was about 170,000 tons, and this is projected to decrease to 160,000 tons in 2024, down from the 2015 peak of 300,000 tons. Meanwhile, Brazil continued to suffer from drought and extreme temperatures, further impacting their pepper crop and keeping prices high. Global production was about 455,000 tons, while demand was around 550,000 tons, giving pepper producers a glimmer of hope.

As of now, the domestic pepper price is VND140-142 million ($5,506-5,855) per ton. With gold at VND83 million per tael and USD at VND25,500 per $1, few are selling pepper.

In 2024, prices of agricultural products like coffee, pepper, rice, and cashew nuts have increased, bringing much-needed relief to farmers. These high prices provide better conditions for reproduction, benefiting the farmers who have endured hardship and maintained hope.

However, the lesson learned is to avoid overshooting production beyond demand to prevent past tragedies. It's crucial to manage price spikes wisely and focus on sustainable development in the pepper industry.