How will Vietnamese coffee prices fluctuate?

According to some traders in the Vietnamese coffee industry, in the first half of June, there were increasing and decreasing days, but the price of green coffee beans in Vietnam is still trending up and having a period. The point has surpassed VND 65,000/kg, even reaching VND 67,000/kg, the highest price ever recorded.

Coffee prices continue to increase mainly because the supply of green coffee beans in Vietnam keeps drying up. The first reason is that enterprises boosted exports in 2022 with 1.77 million tons, up 13.8% compared to 2021. Besides, the 2022-2023 coffee crop decreased significantly in volume due to adverse weather.

Due to reduced supply, in the first five months of this year, Vietnam's coffee exports only reached 866 thousand tons, down 3.9% over the same period last year. Particularly in May, the amount of coffee exported was only 150 thousand tons, down 8.5% from the previous month and the second-lowest monthly export since the beginning of the year. The US Department of Agriculture (USDA) estimates Vietnam's coffee year-end 2022/23 ending stocks at only 1,810 tonnes, the lowest level since 2019-2020.

Mr. Pham Quang Anh, Director of the Vietnam Commodity News Center, said, "The recent increase in coffee prices is mainly due to sluggish export activities because the inventories of Vietnamese farmers are almost exhausted".

Meanwhile, demand for Robusta coffee has increased sharply globally in recent times. The problem of the world economy is continuing to prolong, making Robusta coffee, with its low price advantage preferred over Arabica (at international exchanges, the price of Arabica coffee is almost 50% higher than that of Robusta). Because the price of Arabica is currently too high for many consumers to pay, roasters are increasingly buying Robusta coffee to mix with Arabica to reduce product costs.

The increase in Robusta coffee purchases can be seen in Europe, which imports 33% of the world's total coffee. Specifically, at the end of April 2023, the amount of Robusta coffee in Europe suddenly reversed to increase after seven months of further decrease, to 268,182 tons, accounting for 40% of the total amount of coffee stored in ports of this region. Meanwhile, Arabica coffee inventories are still in decline.

Coffee prices in Vietnam will likely continue to be supported by the supply of the next crop year. The US National Oceanic and Atmospheric Administration's (NOAA) Climate Prediction Center warned that El Nino has appeared and will adversely affect coffee crops in leading producing countries in Europe. Asia, especially Vietnam, makes the problem of recovering the coffee supply here still a big challenge. Therefore, USDA has forecast that Vietnam's coffee exports in 2023/24 will be only 27.5 million 60kg bags, the lowest level in the last three crop years.

Two other major coffee-supplying countries, Brazil and Indonesia, also have negative signals about coffee supply in the 2023-2024 crop year. The USDA even forecasts that coffee production in Indonesia's 2023-2024 crop year is only about 9.7 million bags, the lowest level in the past 12 years.

Concerned about the decline in the coffee area and output, many coffee-growing provinces in the Central Highlands and Southeast are promoting the program of replanting coffee trees.

Recently, the People's Committee of Ba Ria - Vung Tau province has approved the implementation plan of the coffee replanting scheme for the 2021-2025 period in the province. Accordingly, the goal of Ba Ria - Vung Tau is to replant 108 hectares of coffee, with the coffee garden productivity after replanting in a stable business period of 3-3.5 tons/ha on average; income per unit area of coffee after replanting (the period of stable yield) increased by 1.5 times compared to before replanting.

The implementation of coffee replanting in Ba Ria - Vung Tau to improve productivity, quality, efficiency, and income for coffee growers, enhancing competitiveness and added value, contributing to the sustainable development of the coffee industry in this province.

The extreme weather caused by El Nino raised concerns that Robusta coffee beans from significant producers such as Vietnam and Indonesia would be affected, leading to skyrocketing prices. El Nino is associated with below-average rainfall and higher temperatures, both of which reduce coffee production.