Why Is Vietnam Coffee Export Value Rising So Fast?

Vietnam's coffee export value is on track to exceed US$5.5 billion for full-year 2024, a record. Export value hit US$4.84 billion in the first 11 months even though export volume fell 25.4% year on year, because average prices roughly doubled. Domestic green bean prices climbed to about VND 125,000 per kilogram.

The Vietnam Coffee and Cocoa Association attributes the surge to strong demand from coffee-consuming countries. The EU takes 39% of exports, followed by Japan and the United States, while China's share grows. Domestic consumption remains under 20% of production. Rain-delayed harvests, trader losses on futures and farmers switching to durian add uncertainty to future supply for the coffee industry.

In 2024, the Vietnamese coffee industry experienced a rare market surge, with export value reaching US$4.84 billion in the first 11 months, and it is expected to set a new record of US$5.5 billion for the full year. Although export volume fell by more than 20%, the average price doubled, driving total value upward against the trend. Domestic green bean prices have risen to VND 125,000/kg, nearly double the export price at the beginning of the year. The EU remains the largest buyer, while China's market share is steadily increasing. However, continuous rain has slowed harvesting, traders have suffered losses in futures operations, and growers have switched to durian cultivation, adding uncertainty to future supply.

According to recent reports in Vietnamese media, coffee prices rose by an average of more than 50% in 2024, which will push Vietnam's total coffee export value past the US$5 billion mark. Although Vietnam's domestic coffee consumption is on the rise, it still accounts for less than 20% of the country's total production.

The Vietnam Coffee and Cocoa Association (VICOFA) pointed out that 2024 has been an extremely unusual year for the coffee industry. Since the beginning of the year, Vietnamese coffee prices have continued to climb, completing a 90% increase in just ten months. Statistics show that from January to November this year, Vietnam's coffee export volume was close to 1.2 million tons. Although export volume fell 25.4% year on year, export value rose 32.8% against the trend, reaching US$4.84 billion.

VICOFA further stated that with increased supply and the start of the 2024/25 new crop season, Vietnam's coffee exports are expected to remain smooth, so it forecasts that export value will reach a new high of US$5.5 billion this year.

At the same time, domestic coffee prices in Vietnam also remain high, currently holding at around VND 125,000/kg, up VND 3,000/kg from early December. Compared with the same period last year, the current price is twice what it was then. This has also directly pushed up export quotations, from US$3,000/ton at the beginning of the year to nearly US$6,000/ton recently.

From the statistical data, this increase is mainly driven by growing demand from several coffee-consuming countries. The EU remains Vietnam's largest coffee importer, accounting for 39%, followed by Japan and the United States. In addition, Asian countries increased their imports of Vietnamese coffee this year. For example, China's market share rose from 2.5% to 3.8% (comparing the first 10 months of this year with the same period last year). In the 2023/24 crop year, China imported nearly 54,000 tons of Vietnamese coffee. Imports from Malaysia, Indonesia, and the Philippines also increased.

However, Vietnam's current weather conditions are not ideal. According to media reports, recent continuous rain in the central region has slowed the harvesting progress in coffee-producing areas. In many plantations, the coffee cherries have already ripened or even split, which will affect the coffee harvest and output, making it difficult to supply large volumes even during the harvest season.

In addition, futures prices for arabica and robusta coffee fluctuated sharply this year, dealing a blow to some traders. According to reports, some traders failed to accurately predict the trend of futures prices and signed sales contracts with buyers when prices were falling, but prices rebounded soon afterward, leaving them unable to purchase coffee beans from farmers at low prices. To avoid default, they could only buy at high prices to protect their reputation, ultimately causing some traders to suffer losses or even go bankrupt.

Recently, many institutions have taken an optimistic view of Vietnam's coffee output this year. Although Vietnam suffered severe drought from March to May, causing land to crack and water shortages that seriously affected coffee tree growth, continuously rising prices increased farmers' incomes and led them to invest more in land and plantations, helping the coffee crop recover from the drought and reducing losses.

But in addition to coffee crops, Vietnam's fruit exports have also been growing this year, attracting many farmers to cut down coffee trees and switch to popular durian or other fruits, causing Vietnam's coffee planting area to gradually shrink. Therefore, many market views hold that even if Vietnam's coffee output increases, the increase will be relatively limited, and there will not be much improvement in the next few years. Combined with the fact that robusta output in countries such as Brazil and Indonesia has not grown while market demand continues to expand, coffee prices will only remain high.

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