The global coffee market is experiencing a dizzying rise in prices. As of early 2024, the price of Robusta coffee on the London market is nearing the threshold of 3,000 USD/ton. In the domestic market, the purchase price of coffee has reached nearly 70,000 VND/kg. This is an unprecedented event in the history of the Vietnamese coffee industry.
At the end of the trading session on February 19, 2023, the price of Robusta coffee on the ICE Europe – London exchange for the January futures contract increased by 136 USD, reaching 2,960 USD/ton, and the March futures contract also increased by 136 USD, reaching 2,932 USD/ton. These are record high prices.
Similarly, the price of Arabica coffee on the ICE US – New York exchange is also on the rise. The March futures contract increased by an additional 11.30 cents, reaching 202.40 cents/lb, and the May futures contract increased by an additional 11.55 cents, reaching 199.60 cents/lb. These are also strong increases. The trading volume remains very high above the average.
This surge in coffee prices is driven by a combination of factors including fluctuating weather conditions, increasing production costs, and global market dynamics. The rise in prices is expected to impact Vietnam’s coffee exports, potentially leading to increased revenue for Vietnam coffee exporters and Vietnam coffee export companies.
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Analysts predict that the sudden surge in futures coffee prices on both exchanges is due to the international shipping route through the Suez Canal being attacked by Houthi terrorists. This has caused the Europe-Asia transport route to be redirected around the Cape of Good Hope in South Africa, resulting in high transportation costs in the context of potentially strong crude oil prices before OPEC+ cuts production.
Markets are concerned about the decline in Robusta coffee production in Southeast Asia, with Vietnam, one of the leading coffee exporters, decreasing by 3.8 million bags. Meanwhile, the hot dry weather conditions in Brazil have not really improved, although demand remains stable and ICE’s inventory report continues to support at a 24-year low.
Meanwhile, the DXY turned down with a signal not to raise interest rates in the US, making commodities paid in “greenback” become expensive due to the value of emerging currencies falling, contributing to pushing commodity prices high. The Brazilian market also simultaneously increased prices when the Reais increased 0.83%, raising the exchange rate to 1 USD = 4.8631 R$, which has prevented Brazilians from selling coffee for export.
In the domestic market, the price of raw coffee in the Central Highlands provinces only on December 19, 2023, increased an additional 2,500 - 2,700 VND/kg, fluctuating in the frame of 68,900 - 69,600 VND/kg. Experts predict that from now until mid-next year, if major economies in the world continue to cut interest rates, Vietnam’s coffee exports will continue to benefit, because this is when roasters around the world buy stockpiles so coffee prices will continue to rise high in the early months of 2024.
This rise in prices is expected to impact Vietnam’s coffee exports, potentially leading to increased revenue for Vietnam coffee exporters and Vietnam coffee export companies.
Vietnam coffee suppliers, wholesalers, exporters, and export companies are experiencing a decrease in their Robusta coffee inventory. As of December 15th, the inventory has decreased by an additional 30 tons, which is a 0.09% decrease compared to the previous week, bringing the total registered inventory to 34,560 tons (approximately 576,000 bags, each weighing 60 kg). This decrease marks a four-month low, primarily due to a decrease in coffee originating from Brazil.
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Analyses of the global supply and demand for coffee increasingly indicate that coffee prices will continue to rise. Dry and hot weather conditions in the primary coffee-growing regions of southern Brazil threaten the upcoming crop yield. These conditions, combined with speculation that the Federal Reserve may not raise USD interest rates further and could begin a rate-cutting cycle early next year, have prompted funds and speculators to return to the markets, pushing futures prices higher.
The Supply and Forecast Agricultural Company (Conab) recently published its fourth coffee survey, adjusting Brazil’s production upwards, adding 0.7 million bags of Arabica. This adjustment has slowed New York’s upward trend and reduced concerns about the International Coffee Organization’s (ICO) global deficit forecast of 1 million bags.
While the global coffee market is grappling with these challenges, the supply from Vietnam and Indonesia continues to fall short. The demand for “rich bitter” coffee in the global consumer market is increasing. This presents an opportunity for Vietnam coffee suppliers and Vietnam coffee wholesalers to meet this rising demand.
According to the Foreign Agricultural Service (FAS) of the United States Department of Agriculture (USDA), the supply of Robusta coffee for the global consumer market from major producing countries in Southeast Asia, including Vietnam and Indonesia, is likely to decrease.
In Vietnam, FAS estimates that the 2023/2024 crop yield will decrease to 27.8 million bags from the estimated 31.3 million bags in May 2023 due to unfavorable weather conditions. The carryover stock estimate has also been reduced to just 390,000 bags, down from the previous estimate of 2.76 million bags. This situation could impact Vietnam coffee exporters and Vietnam coffee export companies.
FAS also forecasts that Indonesia’s total coffee production for the 2023/2024 crop year will decrease by 18.14% compared to the previous 2022/2023 crop year, down to 9.7 million bags. It is expected that Indonesia will prioritize raw coffee for domestic industry, allocating only about 5 million bags of coffee beans for export, a decrease of up to 35.02% compared to the previous year. This could present an opportunity for Vietnam coffee exporters to fill the gap in the market.
During the coffee season of 2022/2023 (from October 2022 to the end of September 2023), Vietnam coffee exporters set a new record by exporting over $4 billion USD worth of coffee, despite a decrease in production.
According to the General Department of Customs, Vietnam coffee exports in November 2023 reached 80,000 tons, valued at $252 million USD. This was an increase of 83.0% in volume and 59.9% in value compared to October 2023. However, when compared to November 2022, there was a decrease of 37.9% in volume and 17.5% in value.
In the first 11 months of 2023, Vietnam coffee exports were estimated to reach approximately 1.38 million tons, valued at $3.54 billion USD. This was a decrease of 12.9% in volume and 2.5% in value compared to the same period in the previous year. The average export price of Vietnamese coffee in these 11 months was estimated to be $2,570 USD per ton, an increase of 11.9% compared to the same period in 2022.
While exports of Robusta and Arabica coffee decreased compared to the same period in 2022, exports of Excelsa and processed coffee increased. This highlights the versatility of Vietnam coffee suppliers and their ability to cater to different market demands.
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“Due to a decrease in production and an increase in domestic consumption demand, it is expected that Vietnam coffee exports in the 2023/2024 season will continue to decrease, down to about 1.4 million tons. However, because coffee prices continue to rise, the export turnover is likely to set a new record, reaching $4.5 - $5 billion USD,” said Mr. Do Ha Nam, Vice Chairman of the Vietnam Coffee - Cocoa Association (VICOFA).
According to the Vietnam Coffee - Cocoa Association, the coffee-growing area in our country is being narrowed in many key growing regions. In the 2023/2024 season, Vietnam’s coffee production is expected to decrease to about 1.6 - 1.7 million tons, lower than the 1.78 million tons of the 2022/2023 season. Currently, Vietnam ranks sixth in the world in terms of coffee-growing area, but is the second-largest coffee-exporting country in the world. This underscores the significant role of Vietnam coffee exporters and Vietnam coffee export companies in the global coffee trade.
>> Read more: How to Find Coffee Bean Suppliers in Vietnam
In December 2023, the price of Robusta coffee in the domestic market increased significantly compared to the end of November 2023. On December 17, the domestic market recorded an increase of 6,200 - 7,000 VND/kg compared to December 1. By December 20, the coffee purchase price reached nearly 70,000 VND/kg. This is something that has never happened in the history of the Vietnamese coffee industry.
The domestic coffee price is maintaining a high level at the beginning of the season due to the large purchasing demand of export enterprises and FDI enterprises. Given this situation, many forecasts suggest that from now until the end of April 2024 (when Indonesia enters the new season), the situation of scarce supply will still occur, causing the domestic coffee price of Vietnam to increase at least until April 2024.
It is worth noting that at this time, only Vietnam is harvesting Robusta coffee, coffee from other countries such as Indonesia or Brazil will not be harvested until April to July 2024. Not only that, due to the impact of climate change and people switching to other crops, the coffee supply of Vietnam, the country with the largest Robusta production in the world, has also declined in recent years, further limiting supply and contributing to high prices.
Many industry experts predict that the export price of our country’s coffee is expected to remain high, and may even set a new peak in 2024 due to concerns about the global coffee supply. Exports are expected to bring in up to $5 billion USD in 2024. This presents a promising outlook for Vietnam coffee suppliers, Vietnam coffee wholesalers, Vietnam coffee exporters, and Vietnam coffee export companies.
>>Reade more: How to Import Coffee from Vietnam: A Step-by-Step Process
In conclusion: Vietnam’s coffee industry is set for a promising future despite challenges. With high global demand and rising prices, Vietnam’s coffee exports could reach new heights in 2024.
Source:
https://vietnamagriculture.nongnghiep.vn/vietnams-coffee-sector-concludes-the-crop-season-with-new-records-d366057.html
https://vneconomy.vn/gia-ca-phe-cao-ky-luc-xu-huong-tang-se-keo-dai-sang-nhung-thang-dau-nam-2024.htm
