Arabica coffee prices skyrocket, Vietnamese coffee exports benefit

According to the Vietnam Commodity Exchange (MXV), at the end of the trading week from October 30 to November 5, Arabica coffee was the bright spot on the commodity price list when the price skyrocketed by more than 6% at the end of the week.

Meanwhile, Robusta prices decreased slightly by 0.46% compared to the reference. The sharp decrease in coffee inventories on the ICE combined with the weakening of the USD supported coffee prices.

Arabica coffee prices remain high

Last week, qualified Arabica stocks on the ICE-US fell by 30,126 60kg bags, bringing the total number of bags currently in storage to 360,009. This is the lowest level of qualified stocks recorded since early May 1999.

In addition, the Dollar Index fell sharply after the US Federal Reserve (FED) kept its policy interest rate unchanged at 5.25 - 5%, causing the USD/BRL exchange rate to fall by 2.27%. The depreciation of the USD against the Brazilian currency caused farmers to limit sales and contributed to the price increase.

However, stable coffee harvesting activities in Vietnam, combined with Robusta inventories on the ICE-EU maintained around 39,000 tons, helped limit the price increase of this commodity last week.

In the domestic market, this morning (November 6), the price of green coffee beans in the Central Highlands and the Southern provinces continued to decrease by 100 VND/kg, bringing the domestic coffee purchase price to 57,100 - 58,100 VND/kg, down 400 - 600 VND/kg compared to the previous week.

Vietnamese coffee is popular in the world market.

According to the Import-Export Department - Ministry of Industry and Trade , in the third quarter of 2023, coffee consumption demand of most major economies in the world is still affected by economic recession, prolonged inflation and geopolitical tensions.

In the European Union, according to the European Statistical Office, in the first 6 months of 2023, the EU imported coffee from the world at 9.74 billion EUR (equivalent to 10.3 billion USD), down 4.1% over the same period last year.

The downward import trend continued in July 2023, with turnover reaching 1.57 billion EUR (equivalent to 1.66 billion USD), down 11.1% compared to July 2022.

However, the positive point is that Vietnamese coffee continues to be favored by the EU market. The EU has increased coffee imports from Vietnam, an increase of 20.1% in the first 6 months of 2023, with a turnover of 869 million EUR (equivalent to 917.6 million USD).

Vietnam's coffee market share in the EU's total import turnover from the world accounted for 8.91% in the first 6 months of 2023 and increased to 9.52% in July 2023.

However, according to the Vietnam Trade Office in Belgium, the EU Anti-Deforestation Regulation passed by the Parliament on June 29, 2023 and applied from December 30, 2024 will greatly affect coffee exports in the future.

Specifically, the EU will ban the sale of coffee from deforested or degraded land from December 31, 2024. EU regulations require companies selling coffee in the EU to collect the geo-location coordinates of the farms where the coffee is produced. Companies can combine this data with satellite monitoring tools. These tools check whether companies are meeting the requirements of the regulation and identify areas at risk of land degradation and deforestation.

The proposal also labels coffee-growing countries as low-risk or high-risk. Coffee from high-risk regions would have to meet more stringent due diligence requirements than low-risk regions. The regulation aims to address deforestation and forest degradation and help conserve forests to reduce carbon emissions and biodiversity loss. The scope of products covered by the regulation includes: Livestock, cocoa, coffee, palm oil, rubber, soybeans, wood and certain products derived from them, such as leather, tires, or furniture.

New EU regulations are posing significant challenges for Vietnamese coffee exporting businesses.

In the United States, the market's demand for coffee has also been continuously decreasing. However, the United States increased coffee imports from Vietnam, up 30.3% in the first 6 months of 2023. The upward trend continued in July and August, up 6.8% and 5.1% respectively compared to the same period last year.

Accordingly, Vietnam's coffee market share in the total US import turnover from the world increased from 3.51% in the first 8 months of 2022 to 4.89% in the first 8 months of 2023.

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