Recent reports have suggested that Vietnam may be deliberately "hoarding" coffee, contributing to a 30-year high in Robusta coffee prices. However, according to the Vietnam Commodity Exchange (MXV), this is merely a rumor affecting market sentiment. The actual cause of the high Robusta coffee prices is a shortage of supply in key coffee-growing regions.

Domestic Coffee Prices Surpass 92,000 VND/kg for the First Time

In the first two months of 2024, Robusta coffee prices on the Intercontinental Exchange Europe (ICE-EU) have continuously broken records. MXV data shows that on March 7, Robusta coffee prices reached a 30-year high of $3,381 per ton.

On the domestic market, prices have also reached new heights, even surpassing global price increases. According to giacaphe.com, Vietnamese Robusta coffee prices hit a historic high of over 92,000 VND/kg on March 8. This new record represents a 35% increase from the beginning of the year and nearly doubles the price of around 48,000 VND/kg from the same period last year.

Aside from supply disruptions due to conflicts in the Red Sea, reports suggesting that Vietnamese farmers and traders are deliberately hoarding coffee to await higher prices have raised market concerns about potential shortages and driven prices higher.

International news agencies like Reuters and Bloomberg have reported that the significant rise in global Robusta coffee prices at the start of 2024 is attributed to Vietnamese farmers and traders hoarding coffee in anticipation of higher prices.

Is Vietnam Deliberately Hoarding Coffee?

According to MXV, there is no concrete evidence supporting claims that Vietnamese farmers and traders are deliberately withholding coffee to drive up prices. The current shortage in the coffee market may be occurring, but it is not due to intentional actions within Vietnam.

Firstly, during the peak of the 2023/24 coffee harvest, Vietnam's coffee exports have been high compared to previous years. Data from the General Department of Customs shows that coffee exports from November 2023 to February 2024 are 9% higher than the same period last year and 22% higher than the average of the past five years.

Secondly, a coffee shortage is also evident in the domestic market despite the recent harvest. The Coffee and Cocoa Association of Vietnam (VICOFA) forecasts a 10% decrease in the 2023/24 coffee crop, totaling around 1.6 million tons, the lowest in four recent seasons.

Moreover, low stocks from the previous season leave farmers with limited surplus for the new harvest. The USDA estimates that Vietnam's coffee stocks at the end of the 2022/23 season were 339,000 bags and predicts they will only reach 359,000 bags by the end of 2023/24, the third-lowest in 17 seasons.

Thirdly, in the Central Highlands, where coffee is primarily grown, farmers are increasingly focusing on more profitable crops like durian and passion fruit. Additionally, coffee's longer shelf life compared to other fruits means farmers may prioritize transporting high-value crops first.

Vietnam's Supply Remains a Key Market Factor

The hoarding rumors have significantly impacted Robusta coffee prices on the ICE-EU, highlighting Vietnam's crucial role in the global coffee market.

According to the USDA, Vietnam is the world's largest producer and exporter of Robusta coffee. Vietnam exports around 1.6 million tons (26-27 million 60kg bags) of coffee annually, more than double the combined exports of Brazil and Indonesia, the second and third-largest Robusta producers, at around 11 million bags.

Furthermore, the timing of Vietnam's coffee harvest compared to Brazil’s creates a unique opportunity for Vietnamese coffee to dominate the market in the early months of the year. Vietnam’s harvest runs from October to January, making its coffee supply most available in early 2024, while Brazil, the second-largest Robusta producer, harvests from May to August.

Looking ahead, Mr. Duong Duc Quang, Vice President of MXV, stated, “Vietnam will continue to be a focal point for Robusta coffee in the first half of 2024, before Brazil starts its new harvest. Additionally, the current supply situation and the outlook for our new crop suggest that Robusta prices are likely to remain high into the early second quarter of 2024.”

Source: MXV