Coffee exports in 2024 could reach up to 6 billion USD, the highest level in history

According to the Ministry of Agriculture and Rural Development, in June 2024, Vietnam exported 84,600 tons of coffee, a 40% decrease compared to the same month last year. However, because coffee export prices increased by more than 50% compared to the previous year and reached a record high, the export value for coffee in June 2024 was still 300 million USD.

COFFEE PRODUCTION DECREASED DUE TO CLIMATE CHANGE

In the first half of 2024, Vietnam exported approximately 902,000 tons of coffee, a decrease of 10.6% compared to the same period last year. Despite the drop in quantity, the rise in prices led to a coffee export value of 3.2 billion USD, up by 34.5% compared to the same period last year.

The Ministry of Agriculture and Rural Development forecasts that in 2024, coffee export value will certainly exceed 5 billion USD, and may even reach 6 billion USD, the highest in history.

Explaining the decrease in coffee export quantity, the Ministry of Agriculture and Rural Development stated that the coffee harvest from the recent season decreased sharply, leading to a reduction in supply for export.

In the first half of 2024, the average export price of coffee reached a record high of 3,550 USD per ton. In comparison, the average coffee export price in the first half of 2023 was only 2,400 USD per ton. Compared to the same period last year, coffee export prices in the first half of 2024 increased by 48%.

The coffee harvest season is calculated from October of the previous year (when the new coffee harvest begins) to the end of September of the following year. According to the Crop Production Department (Ministry of Agriculture and Rural Development), the coffee area in the 2022-2023 season was more than 710,000 hectares, with a total coffee harvest of nearly 1.8 million tons.

For the 2023-2024 season, the coffee growing area is 709,041 hectares. Due to drought and pest outbreaks in major coffee-growing regions, coffee production decreased by 20% compared to the previous season, down to 1.47 million tons. This is the lowest level in four years, significantly reducing the global Robusta coffee supply.

According to the Vietnam Coffee-Cocoa Association (VICOFA), although coffee export quantity in the first half of 2024 decreased sharply, the total coffee export in the first nine months of the 2023-2024 season is estimated to reach 25.25 million bags (equivalent to 1.52 million tons), an increase of nearly 7.6% compared to the same period last year.

"Coffee exports in July, August, and September will gradually decrease as supplies run low. We will have to wait until October, when the new harvest begins, for Vietnam's coffee supply to increase again," VICOFA predicts. It also states that the Robusta coffee yield for the 2024-2025 season is expected to be between 1.28 and 1.35 million tons, a 20% drop compared to the 2023-2024 season. However, this forecast is significantly higher than the predictions made by some organizations and industry experts earlier.

According to VICOFA, the severe drought in the Central Highlands at the beginning of this year, combined with pest outbreaks (mealybugs, red spiders...), has negatively impacted crop quality. Notably, drought and pests have severely affected coffee yields in many areas.

In Gia Lai province alone, around 4,800 hectares of coffee, equivalent to 5% of the total coffee-growing area in the province, were affected by mealybug disease. Many of these areas suffered severe infections. The cause was identified as prolonged hot weather, followed by early-season rains that created a warm and humid environment, promoting the growth of mealybugs. The damage rate in some areas of Gia Lai reached 50%.

Meanwhile, coffee trading company Volcafe (one of the largest coffee trading companies in the world) forecasts that Vietnam's coffee production in the upcoming season will be around 24 million bags (equivalent to 1.44 million tons). The U.S. Department of Agriculture (USDA) provides an initial forecast of 27.85 million bags (equivalent to 1.67 million tons). The decline in Vietnam's coffee production will continue to tighten the global Robusta coffee supply, pushing coffee prices even higher.

WILL COFFEE PRICES KEEP INCREASING?

Mr. Nguyễn Nam Hải, Chairman of VICOFA, said that the impact of climate change has caused drought not only in the Central Highlands (Vietnam's key coffee-growing region) but globally, reducing the overall coffee supply worldwide and pushing coffee prices to record highs.

In Vietnam in recent years, coffee prices were very low, around 40,000 VND per kilogram, which led to low investment by farmers in coffee cultivation. Many households have shifted from growing coffee to higher-value crops such as durian, avocado, and passion fruit. This has significantly reduced coffee production. Additionally, some coffee-growing areas are now aging and have not been replanted, which further affects output.

"Vietnam's coffee supply is lacking, while speculators have started to stock up, so coffee prices are expected to continue rising in Q3," said Mr. Hải.

According to Mr. Hải, coffee prices have at times reached more than 120,000 VND per kilogram, three times higher than before, forcing businesses in the coffee trade to mobilize large amounts of capital. Companies are borrowing money and paying high interest rates to buy coffee, but still can't gather enough because farmers sold out the coffee last season. The new coffee harvest won't begin until October or November. Therefore, there is a limited supply for export.

In Vietnam's coffee-growing regions, coffee prices have skyrocketed from around 40,000 VND per kilogram in early 2023 to 120,000 VND in May 2024. In June 2024, domestic coffee prices leveled off, maintaining a range of 117,000 to 119,000 VND per kilogram. By July 2024, domestic coffee prices have continued to rise.

According to the Ministry of Industry and Trade's agricultural price survey systems, as of July 3, 2024, coffee prices in the Central Highlands continued to increase, bringing the average coffee price to around 121,000 VND per kilogram.

Specifically, on July 3, compared to the previous day (July 2), coffee prices in Dak Lak and Gia Lai reached 121,200 VND per kilogram, an increase of 1,200 VND per kilogram; in Lam Dong, it reached 120,200 VND per kilogram, up by 1,200 VND per kilogram; while in Dak Nong, coffee prices reached 121,500 VND per kilogram, the highest among the surveyed regions.

On global coffee exchanges, on July 3, 2024, coffee prices saw mixed trends. On ICE Futures Europe, the price of Robusta coffee for September 2024 delivery decreased by 0.69%, reaching 4,039 USD per ton. Meanwhile, on ICE Futures US, the price of Arabica coffee for September 2024 delivery increased by 0.49%, reaching 225.95 US cents per pound.

Global coffee prices, especially for Arabica coffee, are primarily supported by concerns that the dry weather in Brazil could negatively affect coffee tree growth there. Brazil's Somar Meteorologia weather forecasting agency recently reported that the Minas Gerais region of Brazil has not seen any rain in the past week, marking the fourth consecutive week without significant rainfall in this region. Minas Gerais is Brazil's largest coffee-growing area, accounting for around 50% of the country's Arabica coffee production. Therefore, many forecasts predict that coffee prices on global exchanges will continue to rise in the near future.