Coffee Prices Continue to Crash at All Price Levels: Could the surprise come from Arabica, removing the bottleneck for Vietnamese products?

Increased again in the last session of last week, but was still much lower than the significant high of April 18. The weakening USD over the weekend boosted buying activity in the two markets.

Domestic coffee prices seem to be separating themselves from the world market, as they are still growing steadily regardless of world market prices. Based on the actual domestic supply and demand situation, domestic coffee prices are currently trading at a new record level of 122,500–124,000 VND/kg.

It is noted that in Gia Lai, the people’s coffee supply is almost exhausted. Most households sell fresh coffee right after harvest or sell green coffee at a price of 80,000–90,000 VND per kg.

The two leading coffee exporters, Vinh Hiep Company Limited (Gia Lai province) and 2-9 Dak Lak Import Export Company Limited, both said that the amount of goods in stock is only enough to sell until about May and June. 2024 and cannot extend to the new harvest of 2024-2025.

In the 2022–2023 coffee crop, Vietnam must import 200,000 tons of coffee due to a domestic supply shortage. Coffee exports in the first half of April 2024 reached 80,781 tons, down 20.7% over the same period last month and down 3.9% over the same period in 2023. Turnover reached nearly 306.3 million USD, down 4.3% over the same period last year, but a sharp increase of 54.3% over the same period in 2023.

Farmers in Indonesia can postpone coffee harvest until late May or June instead of April as every year, further shrinking the current supply and thereby pushing Robusta prices up sharply.

The coffee supply is forecast to continue to be tense because Brazil will not begin a new harvest until July. Meanwhile, Indonesian coffee mainly serves domestic consumption, with few export sources. Therefore, roasters around the world still rely mainly on goods from Vietnam.

Meanwhile, the impacts of the hot, dry climate continue to be forecast to be very harsh on coffee trees in growing areas of Vietnam today. Although some areas have had rain, it seems that it’s too late to save the young fruit for the next season.

According to experts, coffee prices increased partly due to concerns about a lack of supply. World coffee output this year decreased by about 10–15%. Meanwhile, Vietnam’s output in the 2023–2024 crop year is forecast to decrease by 10%. In addition, tensions in the Red Sea have caused shipping costs and other costs to increase, thereby putting pressure on coffee prices to increase even more.

However, certified-grade Arabica coffee inventories on the New York exchange continue to increase daily, climbing to levels close to the same level last year and up from a more than 20-year low previously recorded in the year. Daily registrations to the exchange could be interpreted as a bearish factor for the market, indicating an improvement in the flow of Arabica coffee to the consumer market.

Domestic coffee prices have just gone through a week of shocking increases of up to 13,000 VND/kg. Since the beginning of the month, domestic coffee prices have increased dramatically, by more than 20,000 VND/kg. In March 2024, the market increased to 15,000 VND/kg; at this time, everyone thought coffee had reached its peak and could not increase further. But coffee is growing stronger day by day, exceeding all speculations among market participants.

Rising coffee prices are good news for Vietnamese coffee growers. But for businesses in the coffee supply chain, from purchasing agents to exporters, traders, and roasters, the rapid and high price increase is also causing many challenges.

It is known that some businesses in the supply chain have to change their coffee import strategy to replace Vietnamese Robusta coffee. This is something many people did not foresee; the whole industry chain is being disrupted. This will greatly affect Vietnamese coffee.

To remove this bottleneck, in the context that the coffee industry sets an export target of 5 billion USD this year and is considered an important industry, experts say, the industry must continue to grow and develop sustainably. In addition to supporting increasing loan limits to overcome immediate difficulties, it is necessary to support building a chain of links in investing in developing raw material areas, production techniques, accessing science and technology transfer, and signing contracts. Contract to purchase coffee products.

Source: Tincaphe.com