Directions to help Vietnamese coffee firmly step on the new "price journey"

This has led many analysts to believe that Vietnamese coffee prices have entered a completely new price cycle. However, in reality, the ability to maintain high prices in the near future is quite uncertain as the supporting factors are all objective. In the long term, the orientation of increasing the value of the coffee industry through increasing the proportion of processed coffee and developing specialty coffee will be the "inevitable" path for the sustainability of the industry.

Coffee prices are higher than the whole market expected.

About two years ago, many Vietnamese farmers still dreamed of selling coffee at 50,000 VND/kg. Even during the harvest season, the abundant new supply was forced to sell at a price of less than 30,000 VND/kg by traders, forcing many gardeners to accept selling coffee beans at a price of less than 30,000 VND/kg. Low selling prices while high investment costs forced many gardeners to abandon cultivation and switch to crops that bring better economic efficiency. This is one of the main reasons why the growing area and coffee output have decreased in recent years.

Everything has changed since the beginning of 2023 when Robusta coffee prices on the Intercontinental European Exchange (ICE-EU) and green coffee prices in Vietnam have continuously increased and broken many important record prices. Even this year, according to statistics from the Vietnam Commodity Exchange (MXV), domestic coffee prices reached 134,400 VND/kg on April 30, the highest price in history up to now. Robusta coffee prices on the ICE-EU continuously set new records, typically the price approaching 5,500 USD/ton in the trading session on September 16. Currently, although Vietnamese coffee prices are not at their historical peak, they still maintain a price of over 120,000 VND/kg, 2 to 3 times higher than the average of previous years.

Vietnam green coffee price in 2022-2024 period

Reduced supply is one of the key reasons that has led to price increases in the past two years. Especially in Vietnam, farmers have abandoned coffee to grow durian, passion fruit... and the prolonged drought in early 2024 due to the impact of the El Nino weather pattern has caused output to continuously decrease in the past 4 years, leading to a decline in exports. Moreover, Vietnam is currently the world's largest producer and exporter of Robusta coffee, and the decrease in domestic supply has a direct impact on the ability to ensure a balance between world supply and demand. The International Coffee Organization (ICO) estimates that the global deficit will be about 4.9 million bags of coffee (60kg) in the 2022-2023 crop year.

Vietnam's coffee output and export in the period 2015-2024

Commenting on the coffee price developments, Mr. Nguyen Ngoc Quynh, Deputy General Director of MXV, said that the factors that have driven the coffee price to continuously increase sharply in recent times are all objective and unsustainable. Therefore, it will be difficult to help prices maintain high levels in the long term. The coffee market is in the early stages of creating a new foundation and to maintain and develop in the long term, more proactive and leading factors are still needed.

Mr. Nguyen Ngoc Quynh, Deputy General Director of Vietnam Commodity Exchange (MXV)

To keep Vietnamese coffee prices "sustainable"

Vietnam is currently the world's leading country in coffee production and export, creating a close correlation in the Vietnamese and global coffee markets. Therefore, in addition to changes in domestic supply, Vietnamese coffee prices are also subject to large fluctuations from "speculative psychology" in the coffee market. The coffee market is mainly a financial transaction, the coffee supply is lower than demand, causing speculators to place orders in the direction of expecting prices to increase, pushing coffee prices up, and then taking profits.

Coffee production in Vietnam has decreased, leading to a decline in exports in recent months; however, global trade has not been significantly affected thanks to the addition of increased exports from Brazil. In the first 8 months of 2024, exports from Vietnam decreased by 12.1% compared to the same period last year, equivalent to more than 2.4 million bags; in contrast, Robusta coffee exports from Brazil, the world's second largest exporter of this commodity, increased 3.1 times compared to the first 8 months of 2023, equivalent to more than 4 million bags.

Exports of Vietnam and Brazil in the first 8 months of 2024

In the long term, the sustainable development of the Vietnamese coffee industry still needs to be based on a solid foundation and comply with the State's industry development orientation. In the Project for the development of Vietnamese specialty coffee in the period of 2021-2030, with the view of developing specialty coffee to ensure increased competitiveness, added value and reasonable profit sharing between stages in the value chain, the market sets a target for the period of 2021-2025, the area of ​​specialty coffee reaches 11,500 hectares, accounting for about 2% of the total coffee area; the output of specialty coffee is about 5,000 tons; the area reaches 19,000 hectares in the period of 2026-2030, accounting for about 3% of the coffee area in Vietnam; the output of specialty coffee is about 11,000 tons. At the same time, the project to develop key industrial crops by 2030 sets the goal of maintaining the coffee growing area at about 640,000 - 660,000 hectares; the output of deeply processed coffee reaches about 20-25% of the total coffee output of the country.

Combining the long-term orientation with the current context, the high anchor price is an important advantage that needs to be exploited to accelerate the transition from quantity to quality, from raw exports to processed coffee lines.

“Focusing on developing the Vietnamese coffee industry in depth, combined with the application of technology, will help increase the added value of export products. This also creates opportunities for profits to be distributed equally among participants in the entire chain, thereby creating equal benefits, helping to retain and promote the subjects to develop together for the sustainability of the billion-dollar export industry,” Mr. Nguyen Ngoc Quynh emphasized.

Source: https://congthuong.vn/huong-di-giup-ca-phe-viet-vung-buoc-tren-hanh-trinh-gia-moi-348463.html