The price of Vietnamese coffee may reach the highest level in the world in 2024. Image: Internet

Crop season marked by instability

"Atypical" and "unprecedented" are phrases reiterated multiple times by Mr. Đỗ Hà Nam, Vice Chairman of the Vietnam Coffee-Cocoa Association (Vicofa), at the Asian Coffee International Conference (Coffee Outlook) when discussing the 2022/2023 coffee crop season. Firstly, the story of coffee prices reaching the highest level in 30 years led to an unprecedented situation where, by June, Vietnam had run out of coffee to export.

In addition, there was an unusually sharp decline in the coffee cultivation area in Vietnam. According to the Ministry of Agriculture and Rural Development, Vietnam currently has over 700,000 hectares of coffee, but Mr. Nam believes that the actual figure may be around 600,000 hectares and continues to shrink due to competition with other profitable fruit crops such as avocado, durian, etc. "Currently, 1 hectare of coffee in Vietnam yields a profit of 100-200 million VND/year, but if planting avocados, the profit could reach 1-1.5 billion VND, so farmers tend to choose crops with higher value. This is something that the government cannot intervene in," Mr. Nam stated.

The unpredictable fluctuations in coffee prices have caused a chain of difficulties for exporters. In the 2022/2023 crop season, there was a crisis as some domestic suppliers failed to deliver according to contracts due to the soaring prices, and these suppliers themselves couldn't procure the goods, facing even cancellations. "From June to October, companies were almost in shambles because there was no delivery according to contracts. This is very unusual because the Vietnamese coffee industry has been highly regarded for its credibility with buying partners. In the past 30 years, we never thought Vietnam could face a shortage," emphasized Mr. Nam. In fact, Vietnam had to import nearly 100,000 tons of coffee from Brazil and Indonesia in the past year to fulfill contractual obligations. This has never happened in the history of the Vietnamese coffee industry.

According to Vicofa's estimates, the quantity of coffee contracted in the previous crop season but still awaiting delivery is currently around 80,000 to 150,000 tons, and it has to wait for the new season to fulfill these contracts. In November 2023, Vietnam exported approximately 200,000 tons of coffee, but Vicofa estimates that half of this was to settle debts from the previous season.

Mr. Nguyễn Nam Hải, Chairman of Vicofa, stated that in 2023, coffee exports decreased both in volume and value. Specifically, the export volume for the first 11 months reached approximately 1.4 million tons, with a total turnover of around 3.5 billion USD, representing a 13% decrease in volume and about a 3% decrease in value compared to the same period in 2022.

Consequences for the new crop

Assessing the 2023/2024 crop season, Vicofa forecasts a potential decrease in production by 5-10%, corresponding to a production level of about 1.6 – 1.7 million tons, and the expected export volume is projected to reach only about 1.4 million tons. "For the first time in Vietnam's history, there is no remaining inventory, whereas in previous years, it was around 200,000 – 300,000 tons," stated Mr. Đỗ Hà Nam.

At the beginning of the new season, green coffee beans were already being sold at 60,000 VND/kg, delivered from December 2023 to January 2024 - a price level unprecedented at the start of the season due to the large purchasing demand from companies. Remarkably, for the first time in history, not only domestic companies but also foreign direct investment (FDI) companies are buying young coffee (purchasing before harvest). Particularly, what export companies are currently very concerned about is that if in 2023, by June, Vietnam had run out of coffee to buy, then in 2024, it could be as early as May or even April that the supply is depleted.

Due to the negligible stockpiles in various countries, the European market is in dire need of Vietnamese coffee, at least until April when Indonesia and Brazil enter their new harvest season. "Everyone is very concerned about this. If everyone rushes to Vietnam to buy coffee, the supply will be very tight. Therefore, the forecast is that coffee prices will continue to rise, and Vietnamese green coffee beans may become the most expensive in the world in 2024," predicted Mr. Nam. Consequently, Vietnamese companies are currently hesitant to sell far in advance due to fears of not being able to secure the supply, leading to significant risks for the companies.

In the context of a tense supply, the Vietnamese coffee industry is also focusing on various solutions for sustainable development, source traceability, especially in compliance with the EU's EUDR anti-deforestation regulations. Currently, major coffee roasters worldwide such as JDE, Nestle, Tchibo, etc., are collaborating with governments, international organizations, businesses, etc., to establish sustainable coffee programs and commit to significantly increasing certified coffee production in the coming years.

Mr. Nguyễn Nam Hải stated that, in compliance with the European Parliament's regulations on anti-deforestation and forest degradation (EUDR), Vietnam is one of the most actively participating countries in demonstrating environmental responsibility and nature conservation. As early as April 2023, the Minister of Agriculture and Rural Development organized numerous meetings with localities, associations, and non-governmental organizations to discuss and establish a roadmap for EUDR implementation.

According to the assessment of the Ministry of Agriculture and Rural Development, since 2000, only 220 hectares in Vietnam have been affected by issues related to source traceability related to deforestation. Therefore, the impact of Vietnamese coffee on the anti-deforestation issue is very small.

Mr. Đỗ Hà Nam expressed his expectation: "With the government's involvement, complying with EU regulations should not be too difficult. The crucial aspect is what tools the EU will use to ensure that when Vietnamese goods are exported to Europe, there will be no issues."