Coffee prices increased sharply but farmers and export businesses did not benefit

Vietnamese Coffee Exporter
Coffee prices increased

The domestic coffee market on June 8 witnessed an unprecedented price increase, with an increase of 800 VND/kg compared to June 7, and approaching the mark of 63,000 VND/kg. This is the highest coffee price in Vietnamese currency ever…

The Vietnam Coffee and Cocoa Association (Vicofa), said coffee prices are continuously increasing due to insufficient supply and demand. It is forecast that from now until the end of the year, coffee exports will still be favorable as demand increases while supply does not improve.

Coffee prices are increasing strongly, why?

During the 10-year period, from 2012-2022, the price of domestic coffee beans only fluctuated from 35,000-40,000 VND/kg, not exceeding the threshold of 40,000 VND/kg. However, entering the beginning of 2023, coffee prices increased sharply when reaching 43,000 VND/kg on January 31. Since then, coffee prices have continuously “escalated” and continuously set record prices of 50,000 VND/kg on April 10 and 60,000 VND/kg on May 25.

According to the agricultural product price quotation system of the Ministry of Agriculture and Rural Development, the highest domestic coffee price on June 8, 2023 was 62,800 VND/kg in Dak Nong and Kon Tum; In Gia Lai, the price is 62,500 VND/kg, and Ia Grai is trading around 62,500 VND/kg; The lowest in Lam Dong province is 62,100 VND/kg.

On the world coffee market, both largest coffee floors simultaneously increased sharply. According to the morning coffee price survey on June 8, Robusta coffee prices on ICE Europe – London increased for the third consecutive session. July spot delivery increased by 60 USD, to 2,674 USD/ton and September delivery term increased by 53 USD, to 2,636 USD/ton.

Coffee prices increased
Coffee prices increased sharply

Similarly, the price of Arabica coffee on the ICE US – New York floor has the same increasing trend. July spot futures increased 2.80 cents, to 185.40 cents/lb and September futures increased 2.15 cents, to 181.70 cents/lb.

The strong increase in Robusta coffee has led to an increase in Arabica coffee, in the context of high demand but scarce supply. The US Department of Agriculture expects Indonesia’s coffee output this year to decrease by up to 20% compared to the previous crop, to 8.4 million bags, because too much rain during the flowering period prevented pollination. Not only Vietnam and Indonesia, even Brazilian Robusta coffee – the three largest Robusta coffee producing countries in the world – have also been negatively affected by the drought.

According to analysts in the world market, coffee prices on the London exchange still maintain an upward momentum due to the report that Robusta coffee inventories as of June 6 continued to decrease by 1,970 tons, or a decrease of 2.41%. compared to a week earlier, down at 79,640 tons.

The skyrocketing trade volume shows that speculative capital flows are massively flowing into highly liquid coffee derivatives exchanges as a temporary refuge, as USDX continues to weaken amid speculation that the Fed will temporarily suspend raising prices. interest rates at the upcoming monetary management meeting.

The US National Meteorological Agency predicts that the El Nino weather phenomenon later this year will cause local drought in the main Robusta coffee producing countries around the Pacific rim, meeting the needs of the global consumer market. About the type of coffee “rich in bitter taste, cheap price” is increasing because of economic difficulties. This includes effects on rainfall and temperature. For the world’s largest robusta coffee bean producers, Brazil and Vietnam, this impact could lead to reduced output.

Coffee exports increased slightly

According to data from the General Department of Customs, Vietnam’s coffee exports in May 2023 reached 165 thousand tons, worth 396 million USD, up 0.9% in volume, but down 0.7% in value compared to In April 2023, compared to May 2022, it increased by 15.7% in volume and 21.8% in value.

In the first 5 months of 2023, Vietnam’s coffee exports are estimated to reach 882 thousand tons, worth 2.02 billion USD, down 2.2% in volume, but up 0.2% in value over the same period. last year.

Center for Digital Transformation and Agricultural Statistics, Ministry of Agriculture and Rural Development commented: In May 2023, world coffee prices fluctuated sharply due to robusta supply in leading producing countries at low levels. short.

Meanwhile, the average export coffee price in the first 5 months of 2023 is estimated to reach 2,295 USD/ton, up 2.4% over the same period in 2022. Thus, in the last months of the year, export value will remain high. even higher when new price contracts are delivered.

2022 is a very successful year for Vietnam’s coffee exports, with exports of 1.78 million tons and turnover reaching over 4.06 billion USD, the highest level ever. With the results of the first 5 months of 2023, we can be confident that coffee turnover in 2023 will continue to set new records.

However, contrary to the joy according to officials’ data, both farmers and some coffee export businesses believe that they do not benefit from increased coffee prices. The current fluctuations in the coffee market, especially financial costs, are too high, making Vietnamese businesses not dare to store goods. Currently, coffee among people and agents is almost exhausted. Most coffee is in the warehouses of foreign businesses with strong financial potential, so these businesses are the main beneficiaries of the record price increase.

“In fact, due to lack of capital, not many businesses buy and store coffee at low prices. On the contrary, when purchasing coffee at this time, the price of coffee purchased increased by half compared to last year, while the export price only increased by 2.4%, causing profits to decrease.

Mr. Thai Vinh Hiep, Vice President of Vicofa.

Mr. Thai Vinh Hiep, Vice President of Vicofa, Chairman of the Board of Members of Vinh Company Limited, said that the price of coffee in Vietnamese currency is indeed the highest ever, but if we say the price of coffee is 60,000 VND/kg High is not right, because 30 to 40 years ago the price of coffee was 40,000 – 50,000 VND/kg. If we multiply the inflation rate of each year, add labor costs, currency depreciation, agricultural inputs… then the coffee price of 60,000 VND/kg is not high. In fact, profits are not enough to satisfy coffee farmers.

According to Mr. Hiep, due to the economic recession, world consumers reduced spending, to reduce product prices, international roasters use Robusta to partially replace Arabica, so Robusta consumption is increasing, in which the market China also contributes to prices. On the other hand, in recent years, the quality of Vietnamese Robusta coffee has gradually improved, and is trusted by international roasters to replace Arabica coffee in their processing recipes.

“The price of Robusta coffee at 60,000 VND/kg is still much cheaper than Arabica coffee priced at 200,000 – 400,000 VND/kg, some even up to 500,000 VND/kg. Previously, Robusta coffee replaced Arabian coffee by only 10-15%, to reduce costs this ratio has increased from 30-50%,” Vice President Vicofa said.

According to Vicofa leaders, high domestic coffee prices at this time are causing coffee export businesses to not benefit. This year, due to high bank loan interest rates, businesses will buy goods wherever they sign export contracts, rather than buying reserve goods as before.

Vicofa said that due to climate change combined with El Nino, the weather this year is quite complicated, affecting coffee productivity. Many forecasts say that in the 2023-2024 coffee crop, Vietnam’s coffee output may decrease by 20%. If this forecast is true, coffee prices in the second half of the year will increase, but due to reduced output, the volume of coffee exported may decrease, leading to a slight increase in coffee export turnover, rather than a slight increase. cannot increase as high as expected.


Helena Coffee Vietnam

Helena Coffee Processing & Export in Vietnam | Helena., JSC, which was established in 2016, is a Vietnamese coffee exporter, manufacturer & supplier. We provide the most prevalent varieties of coffee grown in Vietnam’s renowned producing regions.