Coffee prices soar on low supply, strong demand

By Thi Ha   March 18, 2024 | 05:00 pm PT
Coffee bean prices shot up by 8.96% in early March to VND91,200 (US$3.70) per kilogram as supply runs low.

They climbed to a record high of VND92,000 on March 8 before falling slightly three days later.

This represented a 28.8% increase in the year to date.

Nguyen Hoang Yen, a coffee trader in Dak Lak Province, said since the 2022-23 harvest in December she has sold half her stocks to exporters.

With prices rising relentlessly, she predicted them to soon reach new highs.

Analysts attributed the rise to high global demand and declining supply.

The Dak Lak Department of Agriculture and Rural Development said the high demand has driven the price of May Robusta coffee LRCc2 futures contract by nearly $200 this year to $3,381 last week.

Do Ha Nam, vice president of the Vietnam Coffee Cocoa Association (VICOFA), said global supply is declining.

In Vietnam, only 30% of last season’s coffee harvest remains, he said.

VICOFA forecast this year’s harvest to decline by 10% due to climate change and a shift by farmers to more profitable crops like durian and other fruits.

Other large coffee producers such as Brazil, Indonesia and India have also seen a 10-15% decrease in production due to climate change.

The prices are also rising due to the massive spike in shipping costs due to the Red Sea tensions.

With major economies set to cut interest rates in June, which is also when coffee roasters usually buy more beans [and keep demand high], prices are unlikely to go down anytime soon, VICOFA said.

Vietnam is the world's second largest coffee exporter after Brazil.

Dak Lak accounts for over 30% of its coffee output.

In the first 45 days of 2024 Vietnam exported nearly 295,000 tons of coffee, a 67% year-on-year increase, for $911 million.

The current average price is $3,100 per ton, up 43% from the same period last year.

VICOFA predicted that coffee exports would reach a a record $4.5-5 billion this year, surpassing 2023’s $4.24 billion.

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