Poor coffee harvest in Vietnam! The price rose to US$5000/ton

Recently, Arabica futures prices have continued to rise, hitting a 13-year high. At the same time, Robusta coffee futures rose, the current Robusta futures price of $4981 / ton, once again approaching the $5000 mark. The rise in Robusta coffee futures is mainly due to concerns about Vietnam's coffee supply due to reduced coffee production in Vietnam.

According to a report released by the Coffee and Cocoa Association of Vietnam, although coffee crop production in Vietnam was low in 2023 / 24, Vietnam's coffee export earnings reached an all-time high. Vietnam exported 1.45 million bags of coffee in 2023, down 12.7 per cent, but revenue rose 30 per cent to $5.32 billion.

The increase in income is mainly due to the increase in the average export price of coffee, especially robusta coffee, which is Vietnam's main export, which has surpassed Arabica coffee to reach an all-time high of more than US $5000 / tonne.

It is reported that during the period from March to May this year, Vietnam suffered a severe drought, with some coffee plants withered and damaged, and the production reduction was very serious, pushing up the price of Robusta. Coupled with the fact that no deforestation legislation (EUDR) will soon be implemented in December, European coffee traders increased their procurement efforts, pushing up the futures price of Robusta, which was as high as 5572 US dollars per ton.

Until October, the European Commission said it was necessary to postpone the implementation of EUDR by a year. In addition, Indonesia reported that exports of robusta coffee from Sumatra increased by 76.36% in September compared with the same period last year. After the announcement, the price of Robusta coffee futures began to fall sharply, and the market thought that the price would fall for a time in the coming harvest season in Vietnam.

However, during the harvest season in Vietnam, a series of typhoons affected coffee harvesting operations in Vietnam, and Vietnam was affected by the strongest typhoon Capricorn at the end of September. Typhoon Capricorn killed 226people in Vietnam, many people are missing, several ports and airports are closed, and the economic losses of a large number of houses, factories and infrastructure are estimated at $3.31 billion.

From October to November, Vietnam again experienced Typhoon Tammei and Typhoon Ginkgo, but these two typhoons were not as serious as Capricorn, but they also brought a lot of losses. Although none of these typhoons directly destroyed coffee producing areas, they were hit by torrential rains and strong winds, with rainfall of 150-250 mm, and the worst areas may reach more than 400 mm, affecting coffee production and coffee harvest in the new season. As a result, large quantities of supply can only be concentrated at the end of November or December.

However, at present, the Vietnamese coffee industry is also facing many problems, one is the La Nina phenomenon that may appear recently, according to the World Weather Organization, La Nina is very likely to appear at the end of the year. Once it occurs, it will change the rainfall pattern in Vietnam, bring too much rainfall and affect the harvest of coffee beans.

The second is the implementation of the EU EUDR, which is the largest export market for Vietnamese coffee. However, according to the Coffee and Cocoa Association of Vietnam, many coffee farmers in Vietnam are scattered, and most of the farms are only half a hectare or less, so it is very difficult to prove their compliance with EUDR laws and face the problem of cost.

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