Is Vietnam deliberately 'hoarding' coffee to wait for prices to increase further?

Coffee export prices recover despite improved supply Coffee inventories on the floor increase, helping coffee export prices reverse and decrease

However, according to the Vietnam Commodity Exchange (MXV), this is just a rumor affecting market sentiment. The scarcity of supply in key coffee growing areas is the main factor supporting Robusta prices.

For the first time in history, domestic coffee prices exceeded 92,000 VND/kg.

Robusta coffee prices on the Intercontinental European Exchange (ICE-EU) have been breaking records for more than two months in 2024. According to MXV, Robusta coffee prices hit a 30-year high on March 7, closing at $3,381 per tonne.

In the domestic market, prices have also continuously reached new peaks, with the increase even more "dizzying" than world coffee prices. According to data from giacaphe.com, the price of green coffee beans in Vietnam reached its highest level in history after surpassing VND92,000/kg on March 8. The new record price increased by 35% compared to the beginning of the year and was nearly twice as high as the price of about VND48,000/kg in the same period last year.

In addition to the supply disruption caused by the conflict in the Red Sea, information that farmers and traders in Vietnam are deliberately “hoarding coffee” to wait for higher prices has caused market concerns about the shortage of Robusta supply and pushed coffee prices to peak.

Việt Nam đang cố tình ‘găm’ cà phê để chờ giá tăng tiếp?

Robusta coffee and domestic coffee price developments 2023-2024

International news agencies such as Reuters and Bloomberg reported that the reason for the sharp increase in world Robusta coffee prices in early 2024 was due to Vietnamese coffee farmers and traders hoarding goods waiting for high prices.

Mr. Duong Duc Quang, Deputy General Director of Vietnam Commodity Exchange

Commenting on the impact of this rumor, Mr. Duong Duc Quang, Deputy General Director of MXV, said: “ Commodity prices in general and coffee prices in particular are very sensitive to rumors about supply and demand, especially when Vietnam is currently the world's largest Robusta exporter. Therefore, when this information appeared, market sentiment changed quickly and affected coffee prices even without actual data.”

Is Vietnam deliberately "hoarding goods" waiting for prices?

According to MXV, so far, the information that Vietnamese farmers and traders are deliberately not selling coffee to wait for higher prices is unfounded. The shortage of supply in the coffee market may be happening, but the cause does not come from subjective factors in Vietnam.

Firstly, since Vietnam's 23/24 coffee harvest entered its main season, the amount of coffee exported has always been high compared to previous years. According to data from the General Department of Customs, the cumulative coffee export from November 2023 to the end of February 2024 was 9% higher than the same period last year and increased by 22% compared to the average of the last 5 years.

Vietnam's coffee exports in 2023-2024

Second, the coffee shortage also occurred in the domestic market even though the 23/24 harvest had just ended. Specifically, coffee output in Vietnam in the 23/24 crop year was forecast to continue to be low due to adverse weather impacts. According to the forecast of the Vietnam Coffee and Cocoa Association (VICOFA), coffee output in the 23/24 crop year decreased by 10% compared to the previous crop year, to about 1.6 million tons, the lowest level in the last 4 crop years.

Furthermore, low inventories from the previous crop mean that farmers do not have much surplus for new crop exports. The US Department of Agriculture (USDA) estimates that Vietnam’s coffee inventory at the end of the 22/23 crop year is 339,000 bags and is expected to reach only 359,000 bags at the end of the 23/24 crop year, the third lowest level in the past 17 crop years.

Third, in the Central Highlands, in addition to focusing on coffee cultivation, farmers are increasingly paying more attention to other crops that bring high economic benefits such as durian and passion fruit. Moreover, compared to the above fruit trees, the preservation time of coffee is often longer. Therefore, farmers also tend to prioritize the transportation of durian and passion fruit first.

Supply from Vietnam is still the dominant factor in the market.

The hoarding information has strongly impacted the price of Robusta coffee on the ICE-EU Exchange. This further demonstrates the important role of Vietnamese coffee on the world coffee market map.

According to the USDA, Vietnam is the world's largest producer and exporter of Robusta coffee. On average, Vietnam's annual coffee export volume is about 1.6 million tons (equivalent to 26-27 million 60kg bags), more than twice the total Robusta coffee export volume of the two countries behind, Brazil and Indonesia, with about 11 million bags.

Robusta global supply structure

In addition, the gap between Vietnam and Brazil’s coffee harvest times also creates an opportunity for Vietnamese coffee to “dominate the market” in the first months of the year. Normally, Vietnam’s coffee harvest period lasts from October to the end of January of the following year. This means that Vietnam’s coffee supply will be most available in the first months of 2024. Meanwhile, Brazil, the world’s second largest Robusta producer, harvests coffee in a completely opposite time frame, lasting from May to the end of August.

Commenting on the coffee market in the coming time, Mr. Duong Duc Quang said: “Vietnam will still be the focal market for Robusta coffee in the first half of 2024, before Brazil starts its new crop. Moreover, the supply situation and prospects for the new crop in our country are not very optimistic, which will likely push Robusta prices to continue to stay high in the first quarter of 2024”.

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