Export businesses are struggling as coffee prices increase, what does the Coffee Association recommend?

Processing enterprises in trouble

Coffee growers in many localities are very excited about the high prices of their harvests. However, for export enterprises, this is a sad business year.

Mr. Nguyen Ngoc Luan, founder of the agricultural coffee brand Meet More (Hoc Mon district, Ho Chi Minh City), said that the daily increase in the price of fresh coffee has greatly affected the production and business activities of the enterprise.

According to Mr. Luan, since mid-June 2023, coffee prices have shown signs of increasing from 40,000 - 45,000 VND/kg, then up to 50,000 VND/kg. Each price change lasts for several months. But after Tet, prices increased rapidly and unusually high. When raw material prices increased, Meet More as well as other coffee producers and processors were greatly affected in terms of previously signed export orders.

“Coffee prices have been rising continuously. In early March, coffee prices were at VND86,000/kg, and a few days ago they were at VND91,000/kg… Currently, the price is VND95,000/kg. The rapid increase in prices has left businesses unable to react,” Mr. Luan shared.

Doanh nghiệp xuất khẩu lao đao khi giá cà phê tăng, Hiệp hội cà phê khuyến cáo gì?

Coffee prices skyrocketed and peaked at over 95,000 VND/kg.

Normally, the time from signing the contract to delivery is about 7 months. At the time of signing the order, the price fluctuated around 50,000 - 60,000 VND/kg, but now the input price has increased to 90,000 - 95,000 VND/kg. However, businesses cannot increase the selling price because the exchange rate has increased and logistics costs have also increased. "If the price of goods increases, it will be almost impossible to sell. Therefore, businesses have to cut all profits, even compensate for losses for large orders signed before," Mr. Luan emphasized, adding that businesses are currently having to refuse many orders.

“We can only buy raw materials in small quantities to complete orders. Since the beginning of the year, many foreign partners have come to buy goods, but we have refused them all, because accepting more will only lead to more losses, unless the partners agree to increase prices. The company is trying to bear the loss until June 2024,” Mr. Luan worried.

On the other hand, the demand for coffee is high but the sales volume is small. According to Mr. Phan Minh Thong, Chairman of Phuc Sinh Group, the high prices have caused growers to hoard their products and not sell them. Traders do not have enough products to deliver to processors, and businesses are losing money because they buy high and sell low.

"With the current price of raw coffee at around VND95,000/kg, companies are estimated to lose tens of millions of VND per ton of processed coffee. This figure increases to tens of billions of VND if the quantity of goods to be delivered is around 1,000 tons," Mr. Thong shared.

Many agricultural export businesses say that with prices reaching historical peaks like today, they cannot buy goods, not to mention some suppliers do not deliver goods due to price fluctuations.

What does the Coffee Association recommend?

Mr. Nguyen Nam Hai - Chairman of the Vietnam Coffee and Cocoa Association (Vicofa) acknowledged that coffee prices are at an all-time high. "There has never been a year when coffee prices were above VND95,000/kg. This is a positive and favorable signal for people after many years of low coffee prices," Mr. Hai assessed.

Regarding the reasons for the increase in coffee prices, according to Mr. Hai: Firstly, the inventory of the 2022-2023 crop is low. Since July 2023, businesses have been short of goods. The shortage continues into the 2023-2024 crop.

Second, the impact of climate change and the El Nino phenomenon has caused drought across coffee growing regions around the world. In Vietnam alone, in the 2023-2024 crop season (from October of the previous year to September of the following year), output will fall by about 10%.

Third, military conflicts around the world and tensions in the Red Sea region have increased shipping costs and many other costs, pushing up coffee prices. Finally, many financial speculators around the world have chosen coffee (after oil and gold) to speculate, which has also caused coffee prices to skyrocket.

Forecasting the coffee market in the coming time, Mr. Hai said that prices will continue to increase. Therefore, Mr. Hai advised coffee processing and exporting enterprises to closely monitor market developments and balance their supply sources. If they previously signed a forward export contract, in the current context, to reduce the risk of loss, exporting enterprises should buy and sell immediately instead of signing a forward sale as before.

“In recent days, coffee prices have increased day by day. If businesses sign futures contracts, they cannot avoid losses,” said Mr. Nguyen Nam Hai, adding that in the coming time, the association will continue to meet with coffee processing and exporting businesses to update information and issue warnings.

In the domestic market, on March 22, 2024, domestic coffee prices fluctuated around 94,600 - 95,200 VND/kg. Accordingly, coffee prices in Dak Lak were at 95,000 VND/kg. In Lam Dong, coffee prices were at 94,600 VND/kg; coffee prices in Gia Lai were 95,000 VND/kg; coffee prices in Dak Nong were at the highest level of 95,200 VND/kg.

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