Coffee prices will continue their meteoric rise, given that the unfavorable weather, and especially the decision of the growers in Vietnam to wait before selling their crops, would lead to a decrease in the deliveries of the world’s largest producer of robusta coffee , reports Bloomberg.
Local coffee prices in Vietnam have reached an all-time high this year, as farmers and middlemen continue to wait for more favorable contracts after the poor harvest of the 2023-2024 season. This makes it more difficult for exporters to secure the necessary quantities and it has already triggered a wave of situations of inability to fulfill contracts.
Climate change is causing more and more chaotic weather phenomena and an intensification of drought, so that the global shortage of coffee supply would extend for the fourth year in a row. Vietnam is responsible for about a third of the world’s supply of robusta coffee beans, the cheaper variety that is normally used in instant coffee.
“We can’t say when exactly the price peak will be reached,” says Tran Thi Lan Anh, deputy director of Vinh Hiep Co., a major Vietnamese coffee exporter.
According to her, farmers and middlemen expect prices to reach up to 150,000 dong ($5.89) per kilogram, from the current level of 130,000 dong.
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Vietnam’s dwindling coffee supplies have led to a 50% rise in futures on the London Stock Exchange this year, with prices hitting their highest level in 16 years. The dry weather that has hit large parts of Vietnam has raised concerns about the next harvest and the possibility of even lower supplies.
Many lakes that were used to irrigate coffee plantations in central Vietnam are at low levels, and underground water resources have been depleted, says Trinh Duc Minh, president of a coffee growers’ association in Dak Lak province. It forecast that the province’s 2024-2025 coffee harvest could be up to 15% lower than the 2023-2024 coffee harvest, estimated at 520,000 tonnes, which in turn was lower than the previous year .
“We don’t have water for our farms. If the drought persists we won’t have much coffee beans to sell next season,” says Nguyen The Hue, who grows coffee on six hectares in neighboring Gia Lai province.
But for the time being, prices are being pushed up by the tendency of growers to wait for better contracts before selling their crop. Some Vietnamese farmers have relied on income from fruit sales to cover their expenses and production costs, which allows them to sell only a small portion of their coffee crop.
Bloomberg calculated that since October last year, when the 2023-2024 harvest began, and until now, Vietnamese farmers and brokers have failed to honor contracts for between 150,000 and 200,000 tons of coffee, the equivalent of 10% to 13% of harvested crops.
“It was something terrible, far beyond what I imagined,” says Le Duc Huy, deputy general manager of Simexco Dak Lak export company.
He added that both his company and other exporters suffered losses because they could not honor part of the previously agreed contracts.
Vietnam’s largest coffee exporter, Intimex Group, recently announced that Vietnam had to import about 200,000 tons of coffee last year, a situation that continued into 2024.
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Tags: Bad news coffee lovers Prices continue rise drought persists grain sell
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