Insufficient coffee supply results in high price

Insufficient coffee supply results in high price of Vietnamese coffee which may increase to VND 120,000 a kg.

Insufficient coffee supply results in high price

Gripped by prolonged drought, the Central Highlands has seen a decrease in coffee yields resulting in an inadequate supply of coffee for the market; consequently, prices of the coffee went up dramatically.

Domestic coffee prices today fluctuated between VND109,500 a kg and VND110,000 a kg, continuing to increase by VND1,000 per kg on the weekend.

Specifically, coffee fetched at VND109,500 a kg and VND 110,000 a kg in Gia Lai and Dak Nong provinces respectively. After several adjustments, traders in Lam Dong and Dak Lak provinces agreed to buy coffee at VND109,000 a kg and VND109,800 a kg, respectively.

At the end of the latest trading session, the price of Robusta coffee in London for delivery in May 2024 increased by US$57 to $3,900 a ton while it increased by $62 to $3,852 a ton for delivery in July 2024.

The price of Robusta coffee for May delivery increased by a total of $156. In the first two weeks of April 2024, domestic coffee increased by more than VND10,000 a kg, exceeding VND110,000 a kg.

According to coffee exporting businesses, currently, the coffee planting area in the Central Highlands - Vietnam's largest coffee growing region - is shrinking. Intense heat and a deep drop in groundwater levels lead to a shortage of water so it is predicted that next year's coffee output may continue to decrease.

Meanwhile, demand for coffee in the market continues to be high and Vietnam is the second largest source of coffee in the world; At the same time, in the 2023-2024 crop year, Vietnam is also the first country to harvest, so domestic coffee prices greatly impacted on world prices.

The Vietnam Coffee Cocoa Association ( Vicofa ) said that its businesses are trading coffee at VND110,000 a kg. Vicofa announced that it is normal if coffee prices increase to VND120,000 a kg because the demand for coffee in the world is high while the supply from Vietnam is running out.

According to experts, the actual coffee yield is lower than calculated. It is believed that there is still a lot of coffee inventory among people and agents but this belief has no solid basis because coffee growers usually sell when coffee prices increase from VND50,000 a kg to VND90,000 a kg in just a few months. No one will reserve large quantities when coffee’s prices skyrocket.

It is estimated that farmers and agents are keeping about 300,000 tons of coffee. Meanwhile, for the remaining six months of the 2023–2024 coffee crop, Vietnamese export businesses need about 80,000 tons.

According to statistics from Vietnam Customs, Vietnam's coffee exports in March 2024 reached nearly 189,000 tons, an increase of 17.7 percent over the same period in 2023. However, experts are concerning about the disruption in the supply chain of raw coffee in the past two years. The purchase of domestic coffee is increasingly difficult and risky.

Chairman of Vicofa Nguyen Nam Hai said that it's half time for coffee of the 2023–2024 crop in the country. In the past six months, Vietnam exported 956,000 tons of coffee, down one percent in volume but value soared more than 40 percent compared to the same period last year thanks to a sharp increase in coffee prices.

However, because coffee prices fluctuate strongly, coffee exporting businesses are facing many challenges in the chain of production, processing, purchasing, and supply. In particular, there has been a situation where the parties involved in the chain did not deliver goods according to the signed contracts.

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