Following the rice price surge, coffee has become the next commodity to experience a significant price hike globally, with Vietnam holding the top position in coffee production.

While rice prices have cooled off at the start of 2024, coffee prices continue to climb sharply due to a global supply shortage.

As of January 31, 2024, Robusta coffee futures on the ICE Europe - London exchange for March delivery were priced at $3,305 per ton, and for May delivery at $3,168 per ton. This represents a 16.3% increase for March futures and a 14.9% increase for May futures compared to December 2023. Compared to the same period in 2023, Robusta coffee prices have surged by 62.2% and 57.5%, respectively.

Reports indicate that the surge in Robusta coffee prices is due to record-low inventory levels reported by ICE on January 22, 2024, which has prompted speculators and funds to increase their purchases. Additionally, global shipping and insurance costs have risen due to longer transportation routes (e.g., around the Cape of Good Hope in South Africa), exacerbating the coffee supply shortage.

Weather conditions have also negatively impacted coffee yields in major exporting countries such as Brazil and Vietnam, contributing to ongoing concerns about short-term supply shortages. Economic challenges in 2023 led roasters to tighten production costs and consumers to cut spending, driving them towards Robusta coffee as a cost-effective alternative.

Vietnam ranks as the world's second-largest coffee producer overall, behind Brazil, but leads globally in Robusta coffee production. According to export data, Vietnam exported approximately 1.61 million tons of coffee in 2023, generating $4.18 billion, setting a historical record for coffee export revenue.

In January 2024, coffee exports reached $620 million, a dramatic 103% increase compared to the same month in the previous year. Domestic coffee prices are rising daily, reaching new historical highs. Specifically, in Dak Lak, the price of raw coffee beans has risen to 79,000 VND/kg; in Lam Dong, 78,200 VND/kg; in Gia Lai, 78,800 VND/kg; and in Dak Nong, 79,500 VND/kg. The average price in the Central Highlands is now 78,900 VND/kg, up 85.6% compared to the same period in 2023.

Phan Minh Thong, General Director of Phuc Sinh Joint Stock Company, recounted the dramatic price increases over the past year. Prices surged from 34,000 VND/kg at the beginning of 2023 to 48,000 VND/kg, and later to 50,000 VND/kg before depleting supplies. By July 2023, prices reached a record high of 67,000 VND/kg. Since late last year, coffee prices have soared past 70,000 VND/kg and are nearing 80,000 VND/kg.

Vietnam has long been the leading global supplier of Robusta coffee. International roasters have adjusted their roasting formulas to include more Vietnamese Robusta. Thai Nhu Hiep, Vice President of the Vietnam Coffee-Cocoa Association, noted that global importers are increasingly sourcing coffee from Vietnam. In fact, many companies have nearly exhausted their inventories for export, resulting in a significant drop in stock levels and a historical first where, by June, there was a lack of coffee available for sale.

The Ministry of Agriculture and Rural Development estimates that coffee production in 2024 will decrease to 1.66 million tons. However, export revenue is expected to reach $5 billion due to high prices. The Vietnam Coffee-Cocoa Association predicts that the coffee sector will continue to benefit in 2024 from high Robusta coffee prices, which could potentially reach new peaks due to supply concerns. Coffee prices in Vietnam may remain among the highest globally this year.

Source: Vietstock