Directions for Vietnamese coffee firmly step on the new price cycle

In fact, the ability to maintain high prices in the near future is quite uncertain when the supporting factors are all objective. In the long term, the orientation of increasing the value of the coffee industry through increasing the proportion of processed coffee and developing specialty coffee will be the "inevitable" path for the industry's sustainability.

Coffee prices increase higher than market expectations

About two years ago, many Vietnamese farmers still dreamed of selling coffee at VND 50,000 per kg. Even during harvest, the abundant new supply was "squeezed" by traders, forcing many gardeners to accept selling coffee beans at prices below VND 30,000 per kg. Low selling prices while high investment costs forced many gardeners to abandon cultivation and switch to crops that bring better economic efficiency. This is one of the main reasons the planting area and coffee output have decreased in recent years.

Everything has changed since the beginning of 2023 when Robusta coffee prices on the Intercontinental Exchange in the EU (ICE-EU) and green coffee prices in Vietnam have continuously increased and broken many important record prices.

Even this year, according to statistics from the Mercantile Exchange of Vietnam (MXV), domestic coffee prices reached VND 134,400 per kg on April 30, the highest price in history. Robusta coffee prices on the ICE-EU continuously set new records, typically approaching USD 5,500 per ton in the trading session on September 16. Although Vietnamese coffee prices are not at their historical peak, they still maintain over VND 120,000 per kg, 2 to 3 times higher than the previous price.

Reduced supply is one of the key reasons that has led to price increases in the past two years. Especially in Vietnam, farmers have abandoned coffee to grow durian, passion fruit... and the prolonged drought in early 2024 due to the impact of the El Nino weather pattern has caused output to continuously decrease in the past 4 years, leading to a decline in exports.

Moreover, Vietnam is currently the world's largest producer and exporter of Robusta coffee, the reduction in domestic supply directly affects the ability to ensure a balance between world supply and demand. The International Coffee Organization (ICO) estimates the global deficit will be about 4.9 million bags of coffee (60kg) in the 2022-2023 crop year.

Commenting on the coffee price developments, Nguyen Ngoc Quynh, Deputy General Director of MXV, said that the factors driving the continuous sharp increase in coffee prices in recent times are all objective and unsustainable, so it will be difficult to help prices maintain high levels in the long term.

The coffee market is in the early stages of creating a new foundation and to maintain and develop in the long term, more proactive and leading factors are still needed.

To keep Vietnamese coffee prices "sustainable"

Vietnam is currently the world's leading country in coffee production and export, creating a close correlation between the Vietnamese and global coffee markets. Therefore, in addition to changes in domestic supply, Vietnamese coffee prices are also subject to large fluctuations from "speculative psychology" in the coffee market. The coffee market is mainly a financial transaction, the coffee supply is lower than demand, causing speculators to place orders in the direction of expecting prices to increase, pushing coffee prices up, and then taking profits.

Coffee production has decreased in Vietnam, leading to a decline in exports in recent months; however, trade in the global market has not been significantly affected thanks to the addition of Brazil's export promotion activities. In the first 8 months of 2024, the export volume from Vietnam decreased by 12.1% compared to the same period last year, equivalent to more than 2.4 million bags; In contrast, Robusta coffee exports from Brazil, the world's second-largest exporter of this commodity, increased 3.1 times in the first 8 months of 2023, equivalent to more than 4 million bags.

In the long term, the sustainable development of the Vietnamese coffee industry still needs to be based on a solid foundation and comply with the State's industry development orientation. In the Project on developing Vietnamese specialty coffee for the period 2021-2030, with the view of producing specialty coffee to ensure increased competitiveness, added value, and reasonable profit sharing between stages in the value chain, the market sets a target for the period 2021-2025 for the specialty coffee area to reach 11,500 hectares, accounting for about 2% of the total coffee area; specialty coffee output of about 5,000 tons; in the period 2026-2030, the area will reach 19,000 hectares, accounting for about 3% of Vietnam's coffee area; specialty coffee output of about 11,000 tons. Also, the project to develop critical industrial crops by 2030 targets maintaining a coffee area of ​​about 640,000 - 660,000 hectares; the output of deeply processed coffee reaches about 20-25% of the country's total coffee output.

Combining the long-term orientation and the current context, the high anchor price is a significant advantage that must be exploited to accelerate the transition from quantity to quality, from raw exports to processed coffee lines.