Vietnamese's coffee prices reach the highest level in history

According to traders in the coffee industry, in the last days of May 2023, the price of green coffee beans in the Central Highlands provinces of Dak Lak, Dak Nong, Gia Lai, and Lam Dong is still maintaining above VND 60,000/kg. 

The price of green coffee beans in the Central Highlands exceeded VND 60,000/kg on May 21, 2023. This increase is the first time in history the price of Vietnamese coffee has surpassed this mark and sometimes has reached VND 64,000/kg. After that, the price has decreased but has remained above VND 60,000/kg continuously so far. 

The price of green coffee beans in May exceeding the mark of VND 60,000/kg is beyond the expectations and imagination of coffee exporters. Although it is expected that the price of coffee this year will continue to increase, no one thinks it will reach the mark of VND 60,000/kg.

The price of coffee in Vietnam has increased so high, first due to the decrease in Robusta coffee production in Vietnam and the world. Vietnam is the second country in the world after Brazil regarding coffee exports, but for Robusta coffee alone, Vietnam accounts for 50% of global exports. Therefore, when Vietnam's coffee production declines, it will affect the supply, demand, and international coffee prices. 

According to the Vietnam Coffee and Cocoa Association (Vicofa), Vietnam's coffee output in the 2022/2023 crop year is expected to decrease by 10-15% compared to the previous crop year and reach about 1.4 million tonnes. The main reason comes from the fact that in recent years, many coffee growing areas have been switched by farmers to other more effective crops such as durian, avocado, passion fruit, etc., or intercropped with other crops in the coffee garden (pepper, cocoa, avocado) to reduce market risks and increase economic efficiency. 

According to the US Department of Agriculture's forecast, Vietnam's coffee production in the 2022/2023 crop year will decrease by 6% to 29.75 million bags.

The decrease in the coffee area can be seen in Binh Phuoc - the province with the most significant coffee area in the Southeast, with about 16 thousand hectares, concentrated in the districts of Bu Dang, Bu Gia Map, and Dong Phu. Coffee trees have been planted in Binh Phuoc since the 1920s, then spread to other provinces in the Southeast, such as Dong Nai and Ba Ria - Vung Tau.

In recent years, the area of industrial crops in Binh Phuoc, such as coffee, pepper, and cashew, has declined as farmers switch to other crops, mainly durian. According to the Binh Phuoc Provincial Statistics Office, in 2022, Binh Phuoc reduced 604 hectares of coffee and more than 1,100 hectares of pepper. Meanwhile, the durian growing area increased by 28.4% to more than 4,800 hectares. 

While coffee production in Vietnam decreased due to a decrease in area, the world production of Robusta coffee decreased due to adverse weather. The International Coffee Organization (ICO) forecasts that global Robusta coffee production in the 2022-2023 crop year will reduce by 2.1% compared to the 2021/2022 crop to 72.7 million bags. In particular, the most significant decrease was in Asia and Oceania, with a decline of 4.6% and reaching about 49.7 million bags. 

Meanwhile, the demand for Robusta coffee is on an increasing trend. High global inflation makes consumers pay more attention to the prices of food and beverage items, including coffee. Mr. Thai Nhu Hiep, Vice President of Vicofa, said that Robusta coffee is much cheaper than Arabica coffee, so many consumers mix it with Arabica coffee to reduce costs. 

The global demand for instant coffee continues to increase, which also increases the use of Robusta coffee because this type of coffee is the primary raw material to produce instant coffee products. 

Vietnam is the world's largest producer and exporter of Robusta coffee, and Robusta coffee accounts for nearly 90% of the coffee area in Vietnam. Therefore, the increasing global demand for Robusta coffee has positively impacted coffee prices in Vietnam. It is forecast that coffee prices in Vietnam will remain high for the rest of this year.