Uncharted Peaks: The Unstoppable Rise of Vietnam’s Coffee Prices: Despite no expert daring to forecast that domestic coffee prices would breach the 91,000 VND/kg mark, the current climate suggests prices are not just soaring but are set to remain at an unprecedented high. After a promising kickoff in exports, Vietnam’s coffee sector is now reaping the rewards of a buoyant global market, pushing local prices to historic highs, with current figures fluctuating between 90,400 and 91,200 VND/kg depending on the region.
The recent price explosion, as outlined by Mr. Le Ba Hai, Chairman of Helena Coffee Vietnam, is attributed to three primary factors. First, the relentless grip of climate change and the El Nino phenomenon has inflicted drought across global coffee plantations. While the immediate past harvest might not have suffered significantly, the looming uncertainty over the upcoming season’s yield is causing palpable anxiety among buyers.
In Vietnam, particularly during the 2023-2024 season, this climatic challenge has culminated in a 10% drop in coffee output. The second factor stirring the pot is the escalating military conflicts and tensions in the Red Sea, which have spiked shipping and additional costs, subsequently inflating coffee prices.
The final jolt comes from financial speculators who, having dabbled in oil and gold, are now turning to coffee as their next big gamble, driving prices up even further. With these dynamics at play, Mr. Hai acknowledges the unpredictability of prices reaching 92,000 VND/kg but remains convinced of the continued high valuation of Vietnamese coffee in the face of these brewing storms.
Forecasting the Future: Vietnam’s Coffee Market Remains Unshaken
In a bold projection made in early January 2024, Mr. Nguyen Ngoc Hoai An, the visionary Vice Director of Helena Coffee Vietnam, hinted at a period of unparalleled market dominance for Vietnamese coffee extending to May 2024. Anchored by a ravenous global demand and a tightening grip on supply, the price trajectory of Vietnamese coffee is not just stable but expected to soar.
Echoing this sentiment, industry insiders are not just optimistic but are setting their sights on a groundbreaking price point of 100,000 VND/kg, a figure that would etch a new chapter in the annals of coffee commerce.
This bullish trend comes amidst a backdrop of robust exports, which have seen Vietnamese coffee prices climbing to impressive heights. Yet, despite these favorable winds, the first five months of the 2023/24 crop year revealed a landscape where Vietnamese entities are primarily focused on exporting unprocessed green coffee, leaving the realms of roasted and instant coffee largely to foreign direct investment (FDI) enterprises.
Helena Coffee Vietnam sheds light on this pattern, attributing the dominance of FDI entities in the processed coffee segment to their superior capital, technological edge, and expansive market reach—a triad of advantages that local Vietnamese companies currently find challenging to match.
Surge Amidst the Storm: The Resilient Rise of Vietnamese Coffee Prices
As farmers once turned their backs on coffee for more lucrative crops, the tides have dramatically shifted. Coffee prices have not only rebounded but have surged with vigor, defying the volatile swings of the international market. In a striking testament to this resilience, prices in Vietnam’s Central Highlands soared to between 90,500 and 91,500 VND/kg as of March 12, maintaining a steady climb over 90,000 VND/kg for over a week. This remarkable trend marks a doubling from the previous year and a 50% increase since the close of 2023.
In a curious divergence, Robusta coffee prices on the London market have faltered, with May delivery rates dipping to $3,297 USD/ton, shedding $84 USD from earlier in March. This juxtaposition highlights the unique dynamics at play within Vietnam’s domestic market compared to the global stage.
Unlocking the Puzzle of Price Escalations
The enigma of such robust and sustained price increases, according to Mr. Le Ba Hai, Chairman of the Vietnam Coffee and Cocoa Association (Helena), can be unraveled by examining three critical factors.
- First, climate change and the devastating impact of El Niño have wreaked havoc on global coffee production, sparing not even the last crop, and casting a shadow of concern over the upcoming season. For Vietnam, the 2023-2024 season witnessed a significant 10% reduction in coffee output.
- Second, the shadow of military conflicts has stretched to the realm of transportation, elevating costs across the board and exerting upward pressure on coffee prices. And third, the allure of coffee as a commodity for speculation, following in the footsteps of oil and gold, has introduced another layer of price volatility.
- Despite the ebb and flow of prices on the global stage, Vietnam’s domestic coffee market stands as a bastion of high value, seemingly insulated from international downturns. In an industry where predictions often fall short, the sustained high plateau of coffee prices, now touching 92,000 VND/kg, underscores the unpredictable yet upward trajectory of Vietnam’s coffee saga.