Supply chain disruptions, coffee export prices continue to rise to new highs

Concerns about supply shortages have sent coffee export prices soaring. Concerns about disruptions in the transportation supply chain have sent coffee export prices soaring to their highest levels.

According to the Vietnam Commodity Exchange (MXV), at the end of the trading session on January 22, Arabica prices increased sharply by 3.83%, reaching a three-week high. Robusta prices reached a 16-year high after increasing by 2.94% compared to the reference price. In the context of supply chain problems due to tensions in the Red Sea, the decrease in coffee inventories has raised concerns about local supply shortages.

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Arabica prices surged 3.83% to a three-week high. Robusta prices hit a 16-year high after rising 2.94% from the reference

In the closing report on January 19, the inventory of qualified Arabica on the ICE-US dropped sharply by 10,702 60kg bags, bringing the total number of certified coffee bags to 253,108 bags. This is a step back from the recovery process of the past two months. Moreover, the decline in the inventory of qualified Arabica during the period when Robusta is in shortage due to the tension in the Red Sea also leads to the possibility that the demand for Arabica is increasing but the supply in the market has not been able to adapt.

Previously, the Brazilian Coffee and Cocoa Association said that the South American country exported 3.78 million bags of coffee beans, up 31% compared to December 2022. Brazil's coffee output in 2024 is expected to reach 58.08 million 60kg bags, up 5.5% compared to 2023.

Robusta inventories on the ICE-EU exchange are at a historic low of 30,010 tonnes, also contributing to pressure on supply, alongside concerns about limited coffee sales by Vietnamese farmers.

In the domestic market, this morning (January 23), the price of green coffee beans in the Central Highlands and the Southern provinces also increased by 400 VND/kg. Accordingly, domestic coffee is currently purchased at around 72,200 - 72,900 VND/kg.

2023 will witness an explosion in domestic and export coffee prices. This is also the main factor helping the coffee industry continue to increase export turnover despite a decrease in output.

On average, in 2023, Vietnam's coffee export price will reach 2,614 USD/ton, up 14.5% compared to 2022. However, not all businesses can take advantage of market opportunities. According to the General Department of Customs, in 2023, coffee export turnover of FDI enterprises increased by 17.3% compared to 2022 to 1.7 billion USD. In contrast, 100% domestic enterprises decreased by 2.6% to more than 2.5 billion USD.

In 2023, Vietnam's coffee export price will reach 2,614 USD/ton, up 14.5% compared to 2022.

The market share of FDI enterprises accordingly increased to 40% in 2023 from 36% in 2022. Meanwhile, the market share of domestic enterprises narrowed to 60% from 64% the previous year.

According to experts, Vietnam's coffee exports may continue to set new records in 2024, when coffee still has a lot of room to maintain high prices. Robusta prices on the world market are forecast to not decrease until about the end of the first half of 2024 due to concerns about supply shortages and tensions in the Red Sea. Arabica prices are also unlikely to decrease because standard inventories are still very low.

The world coffee supply situation in 2024 is forecast by experts to be quite worrying as output in leading exporting countries has decreased sharply.

The Import-Export Department (Ministry of Industry and Trade) cited data showing that tensions in the Red Sea could cause a container passing through Europe to cost an additional $1,000 - $2,000. Now, Europe can almost only rely on Vietnam to buy Robusta coffee, leading to price resistance in the domestic market and Indonesia.

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