Arabica coffee prices increased by nearly 10%, is coffee export profitable?

According to the Vietnam Commodity Exchange (MXV), at the end of the trading week from November 27 to December 3, Arabica coffee was the bright spot of the entire market when it skyrocketed by nearly 10%. MXV said that the sudden sharp drop in standard inventories, combined with speculators' expectations of price increases, pushed the price of this commodity to its highest level in more than 5 months.

Prices of two types of coffee increased, of which Arabica increased sharply.

Specifically, the stock of certified Arabica on the European Intercontinental Commodity Exchange (ICE-US) last week fell sharply by nearly 70,000 60kg bags, bringing the total certified Arabica volume to 224,066 bags, the lowest level in more than 24 years. Previously, the European Coffee Federation (ECF) also said that coffee inventories in the region as of the end of October were at their lowest level since 2017, with 8.4 million bags. This has raised concerns about a temporary supply shortage in the market.

Speculators are also continuing to buy in anticipation of higher prices, while a weaker dollar could curb export demand from suppliers like Brazil.

Robusta prices also increased slightly by 1.06% last week, mainly due to the pull from Arabica prices.

In the domestic market, recorded yesterday morning (December 3), the price of green coffee beans in the Central Highlands and the Southern provinces fluctuated between 58,900 - 59,900 VND/kg, an increase of 1,200 - 1,600 VND/kg compared to the beginning of the week.

Vietnam's coffee export prices continue to rise

According to the General Statistics Office, after 7 consecutive months of decline, Vietnam's coffee exports in November 2023 are estimated to increase again, reaching 80,000 tons, up sharply by 83% compared to October 2023, but down 37.9% compared to the same period in 2022. Export turnover reached 251.85 million USD, up sharply by 59.9% compared to October, but down 17.5% compared to the same period in 2022.

In the 11 months of 2023, coffee exports reached 1.38 million tons, down 12.9% over the same period in 2022; turnover reached 3.54 billion USD, down 2.5%.

After 8 consecutive months of increase, the average export coffee price in November 2023 turned down, reaching 3,148 USD/ton, down 12.6% compared to October 2023, but still up 32.8% over the same period in 2022. Accumulated in 11 months of 2023, it reached 2,570 USD/ton, up 11.9% over the same period in 2022.

Coffee harvest for the 2023/2024 crop year is underway in localities. However, rains in major growing areas have hampered the drying of fresh coffee beans. With weather conditions like these, supplies will only increase in the next three weeks or so.

According to experts, the shortage of supply in Vietnam is also a factor contributing to the upward price trend in the coming time because concerns about supply shortages still prevail. The reason for the decrease in exports is also assessed by experts as the inventory of Vietnamese coffee has now decreased to its lowest level ever.

Up to this point, coffee production has decreased but prices have increased. At one point, domestic coffee prices increased to 70,000 VND/kg.

The total coffee area in the country is estimated at nearly 720,000 hectares, but in reality, only 600,000 hectares are planted with pure coffee, the remaining area is intercropped with other crops by farmers. Of this total of nearly 720,000 hectares, only over 185,000 hectares of coffee area is certified for sustainable production.

In the world, the 2023/24 crop year is also assessed to have a less optimistic picture of the global coffee supply situation. The US Department of Agriculture (USDA) has lowered its estimate of Robusta production in the world's three largest producing countries: Vietnam, Brazil and Indonesia. In fact, Vietnam's coffee output is expected to decrease by 10% in this crop year.

The high coffee prices are generally good news for the Vietnamese coffee industry, but they also pose risks of local export imbalances. This is reminiscent of the supply crunch in the final months of the 2022/23 crop year, when domestic coffee prices remained high at VND70,000/kg but there was not enough to sell.

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