Why will Vietnam coffee prices stay high through 2024?

Vietnam's domestic coffee price climbed to 70,000 dong per kilogram in 2023, a multi-year high. Export volume fell 4.5 percent to about 27.7 million bags, yet revenue rose 3.4 percent to a record 4.08 billion US dollars. The Vietnam Coffee and Cocoa Association expects 2023-2024 season output to drop 10 percent, keeping prices firm.

Two forces support the market: tight supply and local quality improvements that allow higher selling prices. Most exports remain green robusta coffee beans, while arabica sales fell about 30.7 percent in volume. Drought linked to El Niño and a shift toward durian and fruit have pulled farmers away from coffee, and export volumes have fallen since August 2023.

Latest data from the Vietnam Coffee and Cocoa Association (Vicofa) shows that in 2023, domestic coffee prices in Vietnam climbed to 70,000 Vietnamese dong per kilogram (about 207 yuan), setting a multi-year high. Although export volume fell 4.5% year on year to 166.2 tons (about 27.7 million bags), driven by prices, export revenue rose 3.4% to US$4.08 billion, the highest level on record. Supply shortages and quality improvements are the two main drivers of the price increase. However, drought conditions and a shift in planting structure are weakening future production prospects. Vicofa expects production in the 2023~2024 season to fall 10%, and coffee prices are highly likely to remain high.

The Vietnam Coffee and Cocoa Association (Vicofa) recently announced that in 2023 the country's domestic coffee prices have risen to 70,000 Vietnamese dong per kilogram (about 207 yuan), a level rarely seen in many years.

From October 2022 to September 2023, Vietnam's coffee export volume was 166.2 tons (about 27.7 million bags, 60 kg per bag), down 4.5% from the previous year. However, rising prices drove revenue up 3.4% to US$4.08 billion, setting a record high.

There are two main factors pushing prices higher: first, a shortage of coffee supply; second, local efforts to improve coffee quality, enabling products to be sold at higher prices.

In terms of export structure, Vietnam mainly exports green coffee beans, while the share of deeply processed coffee products is relatively small, with green Robusta coffee beans having the highest export rate. The details are as follows:

Compared with the previous year, this year's Arabica coffee sales volume and export value fell by about 30.7% and 34.9% respectively; Robusta coffee export volume rose by about 0.7%, and export value increased by about 10.8%.

Although coffee prices rose sharply in 2023, many coffee-growing areas have abandoned coffee cultivation and switched to durian and fruit. The reason is that coffee prices were too low in previous years, and farmers (except coffee companies and some cooperatives) were unwilling to invest too much in coffee trees. At the same time, climate change—especially drought caused by El Niño—has dealt a severe blow to Vietnam's Robusta coffee.

The decline in production has led to a marked reduction in coffee export volume since August 2023. In the first 10 months of 2023, total coffee exports were nearly 1.3 million tons, with a total value of nearly US$3.3 billion, but export volume fell by nearly 11% and export value decreased by 1.2%.

VICOFA predicts that the 2023~2024 coffee harvest will be delayed compared with the previous year, and production will fall 10%, due to the impact of climate change and farmers directing funds toward more economically profitable crops such as durian and fruit. In addition, because coffee prices are trending downward, some areas will carry out green harvesting, which has a major impact on coffee quality at the beginning of the year.

Coffee market expert Mr. Nguyen Quang Binh predicts that coffee prices in the 2023~2024 season will continue to remain high. By June 2024, if the world's major economies continue to cut interest rates, coffee exports will continue to benefit. This is because roasters around the world will buy inventory, and demand is expected to increase. Therefore, coffee prices will not fall, especially Arabica coffee.

Currently, the price of Arabica coffee has risen from 140 cents/lb (70,000 Vietnamese dong/kg) to 175 cents/lb (92,000 Vietnamese dong/kg), and this price will continue to rise. Due to early pressure on Robusta coffee, Vietnamese coffee prices have declined somewhat, but from now until the end of the year, Arabica coffee prices will remain stable until June next year, until the monetary policies of the EU and the US stabilize.

Disclaimer: Some images in this article are from the internet. For some content on the website, such as images, we will respect the original copyright and indicate the source. However, due to the large volume, some images and text may not have been credited in time. Please forgive us. If the original author has any dispute, they may contact the website for handling. Once verified, we will correct it immediately. Compiled and edited by "Coffee Review vdailycom". Please indicate the source when reposting. This article is intended to spread coffee culture. If there is infringement, please inform us for deletion. Thank you~!

The above content is compiled by CoffeeHunters, a coffee news website.