Domestic coffee prices continue to record record increases: How to Tap into the World’s Largest Consumer Market?

Continue to increase and decrease in opposite directions; Robusta increased and Arabica decreased. Robusta coffee prices continue to increase due to concerns about supply shortages. Not only are there long-term concerns about the ability of major exporting countries to supply goods, but also because the Asia-Europe maritime route through the Suez Canal is still blocked in the Red Sea, with no solution in sight “anytime soon.””.

Currently, most container ships have to change directions to go around the Cape of Good Hope in South Africa, a longer, more time-consuming route that has increased freight costs with no end in sight.

There is information that farmers in producing countries in Asia continue to hoard goods due to the expectation that prices will rise even higher when no additional supply has appeared. Meanwhile, data reported by ICE-London shows that inventory levels continue to decline. On January 24, it decreased by 0.39% compared to the previous day, down to 30,670 tons.

Arabica coffee prices at the New York derivatives exchange dropped for the second session after updated weather forecasts showed that the main coffee-growing region in southern Brazil is about to receive significant rainfall, helping to reduce concerns about drought. increased expectations for a better harvest. The situation caused funds and speculation to accelerate the liquidation of their current net positions, causing prices to continue to weaken.

ICE- New York’s reported data also shows a very significant increase in inventory levels. In particular, there is information that ICE-New York will increase the fixed premium for some high-quality wet-processed Arabica coffee producers to attract goods to the auction floor with the expectation of improving inventory levels. Inventory on the floor is currently too low.

Furthermore, the Brazilian reais recovered from a 12-week low after increasing by 0.43%, bringing the exchange rate up sharply, encouraging farmers in this country to boost export coffee sales and also causing coffee futures prices in New York to slump again.

The European Central Bank (ECB) announced its decision to keep the basic interest rate unchanged after its monetary policy meeting. The main Euro interest rate is currently at 4.0–4.50%/year, which has supported Robusta coffee prices to recover due to the negative influence from the previous New York exchange.

The EU is still the world’s largest coffee import and consumer market. In particular, data shows that among Vietnam’s top coffee export markets in 2023, including the EU, Japan, US, Russia, the EU continues to be the largest export market with a volume of 600,548 tons. , worth nearly 1.5 billion USD, accounting for 37% in volume and 35% in value of Vietnam’s total coffee exports.

However, compared to 2022, coffee exports to this market have decreased by 12.8% in volume and 0.7% in value. In the EU, the amount of coffee exported to the German market reached 196,090 tons, down 12.7%; Italy reached 142,191 tons, up 2.1%; Spain and Belgium decreased by 20% and 50.5%, respectively.

According to an expert on the coffee industry, all major EU corporations related to coffee are present in Vietnam. Previously, they cooperated with Vietnam in growing and processing, mainly by buying unprocessed green coffee.

At that time, the tax rate was zero, and they protected the processing part. When the EVFTA Agreement takes effect, taxes on roasted coffee, instant coffee, and other coffee products will drop to 0%, creating conditions for processing and enhancing the value of coffee. Vietnamese coffee to sell into the EU and increase export turnover.

Currently, to take advantage of tariff incentives from the EVFTA Agreement to export to the EU, coffee businesses must also meet market requirements. For the European Parliament’s Regulations on Combating Deforestation and Forest Degradation (EUDR), the area of deforestation and forest degradation is from December 31, 2020 onwards, and the time for major business preparation is 18 months.

For small and medium-sized enterprises, it is 24 months. By January 1, 2025, the EU will monitor producing countries bringing coffee to Europe, and coffee products grown in deforested areas will be returned.

Experts say that the EUDR regulations that Europe introduced are not for the purpose of preventing products from entering the EU market, but they want to have clean products, ensure legality, and aim at production. and sustainable trade. Therefore, businesses should not see this as a challenge but rather as a problem that must be overcome.

Source: Tincaphe.com