Introduction:Recently, domestic coffee purchase prices in Vietnam have risen against the trend, hitting historic highs, which is clearly at odds with global market trends. What factors are driving this price surge? How do the performances of Vietnamese Robusta and Arabica coffee differ in the global and local markets? This article provides an in-depth analysis of the causes behind the price fluctuations and explores future trends in supply and demand.
A rare phenomenon has emerged in the Vietnamese coffee market: while international coffee futures prices have generally been on the decline, domestic coffee purchase prices in Vietnam have continued to climb. In some Central Highlands provinces, transaction prices even briefly surpassed 82,300 Vietnamese dong per kilogram, setting a new historical record. At the same time, Germany’s imports of coffee from Vietnam have not decreased but have instead increased, indicating that European market reliance on Vietnamese-grown Robusta varieties continues to rise. However, expectations of reduced production due to abnormal weather conditions, along with some farmers switching to more economically rewarding crops like durian, may introduce greater uncertainties in future supply.
According to the latest data released by the Vietnam Coffee - Cocoa Association, the futures price for Robusta coffee deliverable in March 2024 has fallen to $3,047 per ton, while the Arabica futures price has dropped to 180.30 US cents per pound. In stark contrast, domestic coffee spot prices in Vietnam have shown a completely different trend — on February 25 alone, the domestic purchase price was raised by 700 Vietnamese dong per kilogram, with the highest transaction price in some regions reaching 82,300 Vietnamese dong per kilogram.
Looking at the international market, quotations from major coffee futures exchanges remain weak. For example, at the London exchange, recent Robusta coffee prices have generally fluctuated between $3,020 and $3,179 per ton. Among them, the official quotation for Robusta coffee deliverable in March 2024 was $3,047 per ton, a significant drop of 4% from the previous trading day, equivalent to a reduction of approximately $127 per ton, indicating that international buying interest remains sluggish.
In contrast, within Vietnam, coffee purchase prices rose by 600 to 700 Vietnamese dong per kilogram in just half a day. In the main producing areas of the Central Highlands, including Lam Dong Province, Dak Lak Province, Gia Lai Province, and Kon Tum Province, quoted prices generally ranged from 81,500 to 82,300 Vietnamese dong per kilogram, with an overall average price of around 82,000 Vietnamese dong per kilogram. Among them, the purchase prices in Lam Dong Province and Dak Lak Province were both raised by 600 Vietnamese dong per kilogram, ranging from 81,500 to 82,100 Vietnamese dong. Meanwhile, the quoted prices in Gia Lai Province and Kon Tum Province even reached 82,000 Vietnamese dong per kilogram, a full 700 Vietnamese dong higher than in the morning session.
Market analysis points out that increased import demand for Vietnamese coffee in the German market is one of the key factors driving up domestic coffee spot prices. Data from Eurostat shows that Germany imported a total of 845,500 tons of coffee from non-EU countries in 2023, with a total value of approximately 2.98 billion euros (equivalent to $3.2 billion), averaging 3,511 euros per ton. Although compared to the same period in 2022, the total import volume decreased by 17.1% and the total value dropped by 27.6%, the proportion of Vietnamese coffee in Germany’s non-EU coffee imports has grown against the trend.
Specifically, although Vietnam’s coffee exports to Germany in the first 11 months of 2023 decreased by 11.3% year-on-year to 1.9868 million tons, its share in Germany’s total non-EU coffee imports rose from 21.89% to 23.41%, and it continues to show an upward trend recently. Local traders in Vietnam stated that producers and growers are currently gradually releasing their inventory, but with strong demand and tightening supply, buyers are scrambling to secure stable supplies by increasing purchases in advance, which further intensifies the upward pressure on domestic prices.
However, the future of Vietnam’s coffee industry is not entirely optimistic. Industry insiders point out that due to climate change, Vietnam’s coffee production this year is estimated to decrease by about 10% compared to previous years. Additionally, since China officially opened its market to Vietnamese durian imports in mid-2023, and given the strong demand and higher profit margins for durian in the Chinese market, more and more farmers are choosing to switch to high-value crops like durian. This also poses a risk of reduced planting area and output for coffee in the future.
Considering the changes in both supply and demand, the Vietnamese coffee market still faces many uncertainties in the future. If production continues to decline and international demand does not show a significant rebound, domestic coffee prices are likely to rise further, placing cost pressures on downstream roasters and consumers. For consumers or importers who are paying attention to Vietnamese coffee beans, it is recommended to closely monitor developments in the Central Highlands producing areas, as well as trends in the international futures market, in order to adjust procurement strategies in a timely manner.
The above content is compiled by CoffeeHunters, a coffee news website.
