 "Your daily cup of coffee may soon cost more. Here's why")
The International Coffee Organisation (ICO) reported that Robusta coffee prices have reached their highest levels in 45 years, with a 17% surge in wholesale prices during April alone. Vietnam, the largest producer of Robusta coffee, is facing significant supply challenges due to poor harvests in recent seasons.
The ICO highlighted the ongoing supply difficulties in Vietnam, a country that continues to grapple with drought and a transition among farmers from coffee to the increasingly popular durian fruit.
Vietnam’s robusta coffee production has been dwindling due to several factors:
Many farmers have shifted from coffee to durian cultivation, driven by the fruit’s rising demand in China. Last year, Vietnam’s durian exports to China totaled $2.3 billion, a figure expected to increase to $3.5 billion this year.
This transition, combined with efforts to curb deforestation, has led to challenges in finding suitable land for coffee cultivation.
Moreover, droughts exacerbated by the El Nino phenomenon have further impacted Vietnam’s coffee production. The prolonged heatwave in Vietnam is damaging crops, leading to concerns about global shortages.
Another driver behind the surge in coffee prices is the increased consumption observed in Asian countries. From October 2022 to September 2023, coffee consumption in the Asia-Pacific region experienced a notable uptick, reaching 44.5 million bags. This represents a 12% increase compared to the previous four years and constitutes over 25% of global coffee consumption.
Additionally, attacks on ships in the Red Sea have disrupted shipping routes, forcing vessels to take longer journeys.
European roasters are stockpiling coffee ahead of a new EU law banning beans grown on deforested land, further straining the supply chain.
How has this affected coffee prices?
Domestic coffee prices in Vietnam have surpassed VNĐ130,000 per kilogram, exceeding the price of black pepper. The country’s coffee exports have increased significantly, with the average export price rising by 48% compared to the previous year.
Robusta coffee prices in Đắk Lắk Province were quoted at VNĐ103,000 per kg last Friday, while in Lâm Đồng Province it was VNĐ102,500 a kg, reported Vietnam News.
Statistics from the Vietnamese General Department of Customs showed that as of April 15, Việt Nam exported about 660,000 tonnes of coffee, with a value of over $2.23 billion. The average export price of coffee in the first quarter of 2024 reached $3,289 per tonne, a 48 per cent gain from the same period last year.
However, in the first half of April only, the average export coffee price soared to $3,790 per tonne.
Prices also rose in the global market, with the May robusta LRCc2 futures contract rising to an all-time high of $5,999 per ton and the May Arabica KCc1 to $4,186.5.
Impact Shorts
More ShortsHowever, supply constraints and low stockpiles are expected to reduce export volumes in the coming months. Farmers in the Central Highlands in Vietnam are facing challenges due to the severe drought and restructuring of plantations.
Robusta coffee farmers in South India rejoice amidst high prices
Robusta coffee farmers in South India are experiencing record-high prices for their produce, with farmgate prices reaching ₹172 per kilogram in the Wayanad market. This represents a significant increase from ₹115 per kilogram during the same period last year, reported The Hindu.
Weather-related factors, including a decline in production in Vietnam and Indonesia, have contributed to the rise in prices. Additionally, the Arabica variety, traditionally priced higher, is now selling at a lower rate compared to Robusta due to its limited availability. Despite challenges such as erratic rainfall patterns affecting crop yields, coffee farmers in India are optimistic about future prospects, emphasising the need for sustainable practices to mitigate the impact of climate change on coffee cultivation.
As per data from the Coffee Board of India, coffee production in India for the fiscal year 2022-23 amounted to 3,52,000 tonnes, with Robusta coffee contributing 2,52,000 tonnes to the total output. India’s coffee export revenues have witnessed a significant increase during the ongoing coffee season, rising to ₹5,279 crore from ₹3,982 crore recorded during the corresponding period in the previous season.
In 2022, India imported $169M in Coffee, mainly from Indonesia ($74.4M), Vietnam ($62.7M), Uganda ($17.9M), Honduras ($3.65M), and Guinea ($2.39M).
With inputs from agencies
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