Vietnam's coffee exports are declining sharply due to dwindling supply

Vietnam's coffee exports have experienced a significant decline in recent months, primarily due to a dwindling supply. According to data from the General Department of Customs of Vietnam, coffee exports in August 2023 plummeted to 84,647 tons, which is equivalent to approximately 1.41 million bags. This marked a substantial 22.3% decrease in volume compared to July 2023 and 30.97% in volume compared to the same period in 2022. As a result of the sharp decline in August, coffee exports for the first eight months of the year recorded a 5.4% reduction in volume compared to the same period in 2022, totaling 1.2 million tons. Nevertheless, the high export prices of coffee, when compared to the previous year, led to a 3.1% increase in export revenue over the last eight months, amounting to nearly 3 billion USD.

The downward trend in coffee exports can be attributed to the depletion of the available supply. Despite the decreased supply, coffee prices have witnessed a recent decline. Most notably, the price of Robusta coffee in the Central Highlands had fallen by 2,000 to 2,400 VND per kilogram on August 28, 2023 (depending on the region) in comparison to the end of July 2022. Robusta coffee prices in Dak Lak and Dak Nong provinces decreased by 2,000 VND per kilogram, reaching a range of 65,600 – 65,800 VND per kilogram. Coffee prices in Lam Dong province dropped by 2,200 VND per kilogram to 64,900 VND per kilogram, and coffee prices in Gia Lai province dropped by 2,400 VND per kilogram to 65,100 VND per kilogram.

Vietnam's coffee prices align with the global trend of falling coffee prices. The Import-Export Department under the Ministry of Industry and Trade reported that the recovery of the US dollar in August 2023 prompted major investment funds and speculators to liquidate their positions and redirect capital towards derivative markets and the US stock market due to more attractive profit prospects. Exchange rate fluctuations also encouraged coffee producers in Brazil to increase their sales. These factors led to simultaneous declines in both Robusta and Arabica coffee prices on international commodity exchanges.

Mr. Nguyen Quang Binh, a prominent coffee market analyst, explained that the recent surge in the value of the US dollar had adverse effects on coffee prices and various other agricultural commodities, as funds flowed into the crude oil sector.

However, the Import-Export Department believes that the price decrease is temporary. Namely, the low inventory of Robusta coffee is expected to have a positive impact on prices within the global coffee market. As of August 25, 2023, certified Robusta coffee stocks monitored by the London Exchange experienced a further reduction of 4,560 tons, which is equivalent to an 11.8% decrease compared to the previous week, reaching a historic low of 34,080 tons (approximately 568,000 bags, each weighing 60 kilograms). Vietnam is currently preparing to enter the 2023/2024 coffee crop which lasts from October 2023 to September 2024. The US Department of Agriculture (USDA) forecasts that Vietnam's coffee exports for this future crop will reach 27.5 million bags, the lowest level in the past three crop cycles. The emergence and extension of El Nino into 2024 are expected to negatively impact coffee production in leading Asian coffee-producing countries, including Vietnam, making the recovery of coffee supply in this region a significant challenge.

In contrast to the national trend of declining coffee exports over the past eight months, coffee exports from businesses in Dong Nai province have shown positive growth. According to the Dong Nai Statistics Office, local businesses managed to export nearly 178,800 tons of coffee during the first eight months of 2023, which is valued at nearly 494 million USD. This represented an impressive increase of nearly 35% in volume and a 47% in value compared to the same period in 2022. With such substantial growth, coffee has become the highest-performing export product among more than 50 key export items in Dong Nai province.

Dong Nai, despite not having a large coffee production area, boasts significant advantages due to its proximity to major consumption markets such as Ho Chi Minh City and nearby seaports. Consequently, it has attracted numerous domestic and foreign corporations to establish coffee processing plants, including Nestlé Vietnam, Intimex Group, and Tin Nghia. Dong Nai is a major hub for coffee processing and export in the Southern region of Vietnam, with its products finding markets both domestically and internationally.