Vietnam Coffee Sets New Price Records

At the trading session on March 27, the price of green coffee beans in the Central Highlands provinces increased by VND1,100 ($0.04) per kg compared to the previous session, to VND98,100 ($4), the highest level ever.

Increasing for 4 consecutive days, this price of the green coffee is currently peaking, up 110 per cent over the same period last year.

On the coffee business forum, many growers and traders were quite surprised when the price of this commodity was about to reach VND100,000 ($4.1) per kg, while the same period last year was only VND46,000 ($1.9).

At the international trading floor, Robusta on the London floor also continuously set new peaks at a price of $3,521 per ton for May delivery. Similarly, Arabica on the New York floor reached over $4,130 per ton. This level continues to exceed the peak of March 10.

Coffee traders said they are reducing collection because prices are too high, with import-export businesses also slowing down buying. As prices increase, losses also increase if they buy more. 

This is the general situation of Vietnamese coffee processing and exporting enterprises recently. They are having to buy at high prices and sell at low prices. Currently, at a price of VND98,000 ($4) per kg, businesses are losing billions of dong.

After setting a new record of VND75,000 ($3.1) per kg in 2023, the upward trend in coffee prices in Vietnam showed no sign of slowing down. During the first quarter of 2024, coffee prices have consistently exceeded the VND80,000 ($3.3) and VND90,000 ($3.7) per kg milestones, with the potential to increase even further.

According to Chairman of Vietnamese Coffee and Cocoa Association (VICOFA) Nguyen Hai Nam, coffee prices skyrocketed due to reduced supply and record low inventories in businesses. The impact of climate change, the El Nino phenomenon, causes drought throughout global coffee growing regions, causing output to decline.

In Vietnam, VICOFA estimated that there is a decrease of at least 10% in terms of coffee yield in 2023 -2024 crop. This drop in production is the result of the shrinking coffee-growing areas as farmers gradually transition to growing durian.

Most notably, farmers are also cutting down coffee trees within coffee-durian intercropped farms in order to comply with China's requirements for durian exports, which prevent durian from being intercropped with other trees.

In addition, geopolitical conflicts and tensions in the Red Sea region cause shipping costs and many other costs to increase. Finally, many financial investors choose coffee (after oil and gold) for speculation, making this agricultural product more expensive.

According to businesses, importers are shifting to buying from India and Brazil because Vietnamese goods are at high prices. But from April, when Brazil enters the crop season, coffee prices may decrease.

Despite the limited supply of coffee, businesses continue to receive a considerable number of export contracts. According to data from the General Department of Vietnam Customs, in the first two months of the year, Vietnam exported 438,000 tons of coffee, earning nearly $1.4 billion.

This is an increase of nearly 28 per cent in volume and 85 per cent in value compared to the same period in 2023. Robusta and Arabica are still two types of coffee with breakthrough growth.