Strange developments in Vietnam's coffee export market: What do experts explain?

Recently, the export price of Robusta green coffee beans has been nearly $1,000/ton higher than the price of Arabica green coffee beans, something that has never happened before.

Previously, the price of Robusta coffee was often only 1/3 to 1/2 of Arabica coffee. Explaining this phenomenon, Mr. Nguyen Nam Hai, Chairman of the Vietnam Coffee and Cocoa Association (VICOFA), said that the main reason was that the supply of Robusta coffee had decreased sharply due to the impact of climate change.

“The sharp increase in Robusta coffee prices is mainly due to fluctuations in supply and demand. Climate change has affected all types of coffee, but most of all Robusta coffee beans, which have large production in Asian countries such as Vietnam, Malaysia, Indonesia, etc. The sharp decrease in the production of this type of coffee has caused the price to increase rapidly,” Mr. Hai analyzed.

For the first time, the export price of Robusta coffee has significantly exceeded the price of Arabica coffee. (Illustrative image: Ethnic Minorities and Development Newspaper)

According to Mr. Hai, in addition to the sharp decline in production, the demand for Robusta coffee beans worldwide has also increased, causing the price of Robusta to rise higher than Arabica in the Vietnamese coffee market – something that has never happened before.

“The world’s demand for Robusta coffee is increasing, this is due to the increased demand for instant coffee. Developed countries such as Korea, Japan… have consumed a lot of instant coffee in recent years. Meanwhile, instant coffee mainly uses Robusta beans as raw material because of its stronger characteristics,” said Mr. Hai.

The Chairman of VICOFA also commented that the high price of Robusta coffee brings great benefits to Vietnam's coffee consumption. Because up to 94% of Vietnam's coffee growing area grows this variety. In fact, it can be seen that Vietnam's export turnover in the first 8 months of the year, although decreased in quantity, increased in value significantly compared to the same period of previous years. Specifically, according to data from the General Statistics Office, Vietnam's coffee export after 8 months reached 1.052 million tons, with a turnover of 3.99 billion USD, down 12.5% in volume but up 34.8% in value compared to the same period last year.

In the first half of September, Vietnam's main export was Robusta coffee, with 15,155 tons exported at an average price of US$5,053 per ton, generating US$76.583 million. Arabica coffee exports totaled 1,129 tons at an average price of US$4,166 per ton, bringing in US$4.705 million. Thus, the export price of Vietnamese Robusta coffee exceeded that of Arabica coffee by US$887 per ton.

The export price of Robusta coffee was first recorded to be higher than that of Arabica coffee in May with a gap of 32 USD/ton (Robusta coffee beans 3,920 USD/ton and Arabica coffee 3,888 USD/ton). The gap then widened as the price increase of Robusta coffee was stronger.

Economists explain that in the past, Robusta coffee prices were only maintained at about 1/3 of Arabica coffee prices. Due to the low price of Robusta coffee and the improving quality, roasters around the world have increased the usage rate, causing demand to increase. Meanwhile, Robusta coffee production has decreased due to the impact of weather and farmers switching crops after a long period of low coffee prices, causing the coffee growing area to shrink.

At present, in Vietnam, coffee is preparing to enter the new harvest season. Mr. Nguyen Nam Hai recommends that people should prepare processing, drying and drying facilities well to ensure that coffee beans are preserved in the best way in case of adverse weather. “Usually, Vietnam will harvest coffee in November and December. If it is sunny at this time, the harvest will be very favorable. However, if it rains, with such a large harvest, our drying facilities are not enough to meet the demand, which will be very dangerous. The quality of coffee beans will go down, and export output may decrease sharply,” Mr. Hai emphasized.

In the world market, in the trading session last week, the price of Robusta coffee on the London floor for November delivery was at 5,059 USD/ton, down 427 USD/ton compared to the peak set in the trading session on September 16 (5,486 USD/ton). The main reason was that investors took profits after the price of this agricultural product increased too quickly in a short period of time.

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