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Why have coffee prices increased unprecedentedly?

8 thg 5, 2024

Robusta coffee prices in the international market have just reached a new peak in the context of harsh weather making it difficult for coffee cultivation, while consumption demand in Asia is increasing. In addition, the reason also comes from the wave of switching to durian growing in Vietnam - the world's leading coffee producing country.


"Everything is difficult when coffee beans and eggs are increasingly expensive," said Ms. Nguyen Huong Giang at Giang cafe, located in Hanoi's Old Quarter.


Established in 1946, the cafe is known as the birthplace of egg coffee, a local specialty made from Robusta coffee and whipped eggs. Now, rising costs have put significant pressure on the company's finances.


However, this coffee shop said it would not change the price of 35,000 VND (1.38 USD) a cup, only half the price at Starbucks - which has opened in the town.


"It's not easy for us to raise prices thinking about the regular customers who have been coming since my grandfather's time," said cafe founder Giang. The cafe now also offers baked goods and whole coffee beans to cope with financial stress.


Robusta coffee futures contracts in London reached a new peak at the end of April 2024, exceeding 4,500 USD/ton. Although the market has cooled since then, prices are still much higher than at the end of 2023.


There is a rush to plant durian

Vietnam is the second largest producer of coffee beans in the world and is also the largest producer of Robusta coffee. But many farmers in the S-shaped country are turning to growing durian, a fruit famous for its thorny appearance, sweet taste and pungent smell.


Dubbed the "king of fruits", durian has become famous in China in recent years. In 2023, Vietnam exported more than 2 billion USD of durian to China, more than 5 times the amount in 2022, and may increase even more this year.

The rush to grow durian has reduced the area planted with coffee, thereby reducing the supply. Coffee grows best in the tropics, and finding new land to grow coffee is increasingly difficult as countries work to combat deforestation.


This shift occurs in the context of increasingly scarce supply due to the El Nino weather phenomenon causing drought in Southeast Asia.


The International Coffee Organization reported that Vietnam's coffee output totaled 29.2 million 60 kg bags from October 2022 to September 2023, down 9.8% over the same period last year.


"It's too hot and there's not enough water so coffee doesn't grow well," said Ngoc, a coffee bean seller in Ho Chi Minh City. She has a contract with a farm in the interior of Dak Nong province but said the crops there are withering due to prolonged drought.


Another factor is that large European and American companies are switching from the premium Arabica variety, mainly produced in Central and South America, to the relatively inexpensive Robusta coffee to cope with transportation costs. and fuel surges, Japanese trader Marubeni said.


Structural factors such as growing consumption in Southeast Asia and China also contribute to this. From October 2022 to September 2023, the Asia-Pacific region consumed a total of 44.5 million bags, more than a quarter of the world's total consumption and an increase of 12% compared to the previous 4 years. Overall global consumption increased by only 1% during this period.


In Vietnam, sitting and chatting over a cup of coffee on the sidewalk has become popular. Although the country is said to have started growing coffee in the 19th century, the drink only started to become popular in the 80s. Demand has increased as Vietnam's economy has grown.


Consumption in coffee-producing countries in Southeast Asia was previously dominated by low-quality coffee unsuitable for export. But with the growth of Starbucks and other coffee shops, local demand for high-quality coffee beans is increasing.

Source: Vietstock

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