Here’s What Vietnam Has to Do With the Cost of Your Coffee
Vietnam’s vast hoard of coffee beans is shrinking, a phenomenon that’s set to push rising global prices even higher.
The median Bloomberg survey estimates that stockpiles will fall half a percent by September, compared to one year ago. Output from Vietnam, the world’s largest robusta supplier and second-largest coffee producer, is also expected to drop in 2022-23.
These dwindling coffee reserves and poor crop outlook are occurring at a moment when world coffee consumption has begun to recover from the virus-induced slump. The benchmark price of robusta has risen 17% since a low point in July (10 months) due to supply concerns from Brazil to Africa.
The instant coffee maker Nestle SA has made a return to Robusta. It is used in blends and espressos. As people seek to offset rising inflation, Robusta is in high demand, as it’s usually less expensive than arabica.
According to data from customs, bean availability has dropped in Vietnam. Compared to a year ago, shipments increased 17% to 1.13 Million Tons in January-July. The increasing supply of container ships and vessels has helped with the increase in exports. However, this may not be sustainable due to shrinking stockpiles.
“We are worried” about a shortage through early November, said Phan Hung Anh, chief executive of Quang Minh Coffee Trading JSC in the southern province of Binh Duong. According to him, local coffee growers may only have 2% of their annual yield, in comparison with 13% the year before.
After the Brazilian drought and subsequent frost, one of the largest coffee markets in history is currently facing a deficit. Colombia’s crop damage is causing it to struggle, and Nicaragua, Guatemala, Honduras, Nicaragua, and Nicaragua will all run out of coffee supplies by the 2021-22 harvest. Costa Rica’s next-season crop is showing signs of stress, and a drought has cut robusta yields in Uganda.
Fall in coffee production
The slump in Vietnamese inventories pushed domestic robusta prices in Dak Lak province, which accounts for about one-third of the country’s harvest, to a record high of 49,100 dong ($2.10) a kilogram last week.
The survey shows that carryover stocks are now at around 200,000 tons as of Oct. 1st, compared to an estimate of 400,000 tons one year ago. The survey indicated that output could fall by 6% to 1.72million tons in 2022/23. The robusta variety accounts for about 90% of Vietnam’s coffee output.
A drop in the planting area for “profitable” fruit trees and a rise in fertilizer prices will probably affect production in 2022-23, said Do Ha Nam, Intimex Group’s chairman, and the Vietnam Coffee and Cocoa Association’s deputy head.
Citigroup Inc. has reduced its forecast for Vietnam’s coffee production this year. This is due to local crop surveys showing that cherry development was affected by the absence of fertilizer use this year. “This poses substantial risk to the prospect for the upcoming planting season,” it said in a report earlier this month.
—Marvin G. Perez assisted
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