Vietnamese coffee 'redraws' the world market

Peak and then peak?

On the last day of January 2024, coffee prices in many places in the Central Highlands, especially Dak Nong , reached and surpassed the unimaginable milestone of 80,000 VND/kg. Mr. Nguyen Dac Dat, Director of Nga Thanh Trading Company Limited in Krong No District (Dak Nong), said: Many units are under pressure to deliver goods according to contracts and have to offer to buy coffee beans at 80,500 - 80,700 VND/kg, but the supply is very limited.

The reason is that those who need money have sold everything, while those who do not need money continue to stockpile in the hope that the price will increase further. But in reality, the amount of coffee still stored by people and traders is not much because no one thinks that the price of coffee will increase to this level. "According to my experience, with the current situation, the price is likely to continue to increase. I myself only have a little left, so I have to stockpile to sell roasted coffee for the whole next year," said Mr. Dat.

Coffee prices doubled in about a year

Looking back a year ago, coffee prices of only 41,000 - 42,000 VND/kg were considered "at a good price". More than a month ago, when coffee prices reached 67,000 - 68,000 VND/kg, it was a record high and many coffee growers and traders set a profit target of 70,000 VND/kg. No one thought that coffee prices would continuously reach peaks and then break one peak after another.

The reason is that the world's coffee demand continues to increase; tensions in the Red Sea cause shipping costs and delivery times to be prolonged; drought in many places... push coffee prices on the world market to increase continuously in the first month of 2024. Specifically, for robusta coffee on the London market for delivery in March 2024; last week, it increased for 4 consecutive sessions (1 session decreased) with a total increase of up to 141 USD/ton, in the past 2 days it increased by 66 USD/ton to reach an unbelievable number of 3,336 USD/ton.

Not only Robusta coffee but also Arabica coffee prices on the New York floor also increased, with the March delivery contract down 4.75 cents to 194 cents/lb. Arabica coffee prices increased due to concerns about the impact of El Nino on supplies from Brazil. In addition, reserves in important markets such as Europe and the US are decreasing rapidly.

According to a survey by Thanh Nien , many experts and businesses in the industry have the same opinion: Coffee prices are likely to continue to increase. Looking at the statistics of the General Department of Customs, there are many positive signals. In January 2024, Vietnam's coffee exports reached 210,000 tons, up 48% in volume; turnover reached more than 621 million USD, up 99.6% over the same period in 2023. "The Red Sea tension really makes it difficult for many coffee exporting businesses with CIF export prices, but we export FOB so it does not affect anything. That is why some coffee businesses say they cannot deliver goods but coffee exports still increase," said the leader of a large coffee business.

Why do coffee prices hit record highs but many people still suffer losses?

Coffee prices doubled in about a year

As someone with more than 20 years of experience in the coffee industry, Mr. Phan Minh Thong, General Director of Phuc Sinh Joint Stock Company, analyzed: Over the past years, Vietnam has affirmed its position as the world's number 1 producer and supplier of robusta coffee. More importantly, the whole world is accustomed to buying cheap robusta coffee from Vietnam. Even roasters around the world have changed their formulas and ingredients to make the most of Vietnam's robusta coffee source. Famous European and American coffee companies make a lot of profit from our cheap coffee source and they are passionate about exploiting that cheap supply. Therefore, the world market is sometimes flat at 1,200 - 1,400 USD/ton, high at 1,900 - 2,000 USD/ton, domestic at 34,000 - 35,000 VND/kg. On the other hand, with Vietnam's coffee output reaching 1.7 - 1.8 million tons per year, many people feel it is endless.

But because the price of Vietnamese coffee is too cheap while the price of real estate has increased sharply, one hectare of land has increased from several hundred million VND to several billion VND, the profit from growing coffee is no longer attractive to farmers. For farmers who are attached to agriculture, the profit from durian trees as well as many other crops is more attractive to them. And many people are gradually converting their coffee gardens to plants with higher economic value. There are no specific statistics, but in fact, through observation, it is shown that the area and output of coffee in Vietnam is continuously decreasing.

"Many coffee traders said that in the past, when coffee ran out, exporters would wait for a few days or a week to have it again. But that did not happen in 2023. European and American roasted coffee importers had to send people to Vietnam to visit warehouses and raw material areas to "monitor the supply"... but everything was empty. And now, in January 2024, the coffee industry continues to have many unexpected events... That is the reason why coffee prices set a new milestone every day," Mr. Thong explained.

Analyzing the fact that coffee prices are increasing but many people are losing money, according to Mr. Thong, in the 2023/2024 coffee crop year, the market is still following old habits, and coffee traders have started short-selling hundreds of thousands of tons. Since the price of 50,000 VND/kg; farmers and suppliers have sold coffee in large quantities, then the price increased to 52,000 VND/kg and 54,000 VND/kg. In September 2023, coffee was fixed at 58,000 VND/kg, with delivery in October and early November. But the coffee price did not stop or turn around but continued to increase, making it impossible for the participants to deliver according to the contract. Traders who sold short have no goods to deliver, so they "reneged" on the exporter, pushing the coffee industry into chaos. In the Central Highlands, many coffee traders have suffered losses and gone bankrupt.

"There are also opinions that farmers are greedy, the coffee price is 78,000 VND/kg and they still don't sell. It must be said that everyone is greedy, not just farmers. For decades, farmers have sold their products cheaply, we use them and think it is natural. But this is the time we realize that nothing is forever taken for granted. They have reasons to do this and we must accept it to change our business plans. Large coffee roasting and distribution companies in the world have taken advantage of making huge profits from cheap Vietnamese coffee. After 2023, buyers realize that Vietnamese robusta is no longer endless. And to develop the coffee industry sustainably in the long term, both buyers and sellers must really care about coffee and coffee growers. Only when large coffee companies in the world are less greedy can this industry develop sustainably," said Mr. Thong.

Source link: https://thanhnien.vn/ca-phe-viet-ve-lai-thi-truong-the-gioi-185240131210829464.htm