Will Vietnam Coffee Prices Fall When the New Crop Arrives?
Vietnamese Robusta coffee spot prices have repeatedly set records, up 49% year on year and 30% so far this year, with green coffee in the Central Highlands quoted at 91 million to 93 million Vietnamese dong per ton. Declining production, strong demand, and solid exports drove the rise, but traders expect Brazil and Indonesia's new harvests to ease supply and pull prices back.
Drought linked to El Niño and shrinking coffee cultivation areas cut Vietnam's 2023/24 output by about 10%, while inventories sit at roughly one-third of previous years' levels. January to February exports still reached 390,000 tons, up 16.2%, with revenue up 85%. Red Sea disruption and higher shipping costs add further uncertainty to the trade.
Vietnamese Robusta coffee prices have recently hit record highs repeatedly, with spot prices surging 49% compared to the same period last year and accumulating a 30% increase so far this year. Declining production, robust demand, and strong exports have collectively driven up the market, but industry insiders are not optimistic about future trends. With Brazil and Indonesia's new harvest seasons approaching, supply is expected to improve and prices may fall back. Meanwhile, the ongoing Red Sea crisis continues to spill over, and rising shipping costs are adding variables to the coffee trade. This article will review the latest developments and potential risks in the Vietnamese coffee market.
Recently, the Vietnam Coffee and Cocoa Association announced that Vietnamese Robusta coffee prices have risen sharply, driven by multiple factors including declining local production, climbing demand for Robusta coffee, and strong export performance. In the Central Highlands, the expected price range for green coffee is 91 million to 93 million Vietnamese dong per ton, with current spot prices repeatedly setting historical records, up 49% compared to 46 million to 47 million Vietnamese dong per ton in the same period last year, and accumulating a 30% increase so far this year.
Looking at export data, Vietnam's coffee exports are showing growth. Reports from Vietnam's General Statistics Office show that February coffee exports fell 20% year-on-year to 160,000 tons. However, total coffee exports from January to February rose 16.2% year-on-year to 390,000 tons. Export revenue reached 138 million USD, up 27.9% and 85% respectively compared to the same period last year. Major export markets include Germany, Italy, Japan, and Spain.
Some Vietnamese exporters report that global demand for Vietnamese Robusta coffee is quite strong, yet the supply chain has contracted this year. On the production side, drought caused by El Niño weather and shrinking coffee cultivation areas led to a 10% decline in Vietnam's coffee output for the 2023/24 season. Inventories are equally concerning, currently standing at only one-third of previous years' levels. This situation stems from last June, when for the first time in history farmers had no coffee to sell, causing inventories to plummet sharply. As a result, traders and exporters have been aggressively purchasing to replenish stocks, further driving up prices, with coffee prices expected to peak in the near term.
However, industry insiders are bearish on future price trends. As April approaches, the new harvest season for Robusta coffee in Brazil and Indonesia is about to begin, and market supply is expected to improve. Once supply recovers, Robusta coffee prices will face downward pressure. Therefore, Vietnamese experts are urging growers and traders to sell their inventories as soon as possible, and advocating for increased investment in Vietnam's coffee industry.
Additionally, geopolitical issues continue to affect coffee prices. Currently, Houthi forces are still launching attacks in the Red Sea region, and the Red Sea crisis has yet to ease, continuously spilling over into the Gulf of Aden, the Arabian Sea, and the Persian Gulf. The most severely affected routes are those from Europe to the Far East and some from the U.S. East Coast to Asia, forcing shipping companies to divert around the Cape of Good Hope in Africa. This has led to increased fuel consumption, higher costs, longer transit times, and risks such as seafarer strikes.
The above content is compiled by CoffeeHunters, a coffee news website.
