Maintain the reputation of Vietnamese coffee amidst soaring prices

Mr. Nguyen Nam Hai

Recently, the coffee market situation has undergone hot developments, especially regarding prices. Could you share some insights about the current landscape of the Vietnamese coffee industry?

In the coffee crop 2023-2024 and especially in 2024, coffee prices reached the highest level in all years. Currently, each ton of exported coffee is priced at over US$4,000 and domestic coffee prices are over VND102,000/kg. For many years, coffee prices have always been low, only at or below the cost of production, but in 2024, as well as the 2023-2024 crop, coffee prices have increased significantly. This has brought high profits to coffee producers.

In the first quarter of 2024, Vietnam's total coffee export volume reached about 600,000 tons with a turnover of US$1.9 billion. This is also the highest level in recent years, and this increase is due to coffee prices.

To sustain this result, Vietnam needs to develop sustainable coffee production. Climate change is the first factor affecting the coffee industry. In recent years, not only Vietnam but all coffee-growing regions worldwide, especially those growing robusta coffee, have been greatly affected by climate change. This is the most important factor affecting the decrease in coffee productivity and output in the past crop year. The current issue is to ensure sustainability for the coffee industry from production to processing and export. Especially, it is necessary to establish a relationship between businesses and farmers to build coffee regions that achieve sustainable development.

At the current price level, while farmers benefit, businesses are facing difficulties. So, how should sustainable development be implemented to ensure that all elements in the supply chain, from farmers to businesses, benefit?

In the production, business, and export chain of coffee, every stage needs to ensure sustainability. Recently, the Vicofa has issued warnings about distant buying and selling. For example, harvesting coffee only from October to December, but businesses have purchased coffee since August, which will create high business risks. Therefore, all businesses need to pay attention to business direction to avoid distant buying and selling.

In Vietnam's coffee supply chain, farmers do not directly sell to exporters but through a system of agents and traders. When coffee prices rise, there have been instances of broken transactions in the trader link. Therefore, the Vicofa has issued warnings to businesses, especially intermediary units such as agents and traders, to ensure credibility with Vietnamese exporters as well as foreign businesses.

For many years, coffee prices have always been low. What are the reasons for the recent sharp price increases?

There are many reasons for the increase in coffee prices. First, in the 2022-2023 crop, inventory levels reached the lowest level in many years. By October, the 2023-2024 crop had just started, but since June or July, we have been short of coffee, with no deliveries for pre-sold export contracts. But when the crop started, coffee prices continuously increased, affecting the delivery of goods by businesses.

Secondly, due to the impact of climate change, especially the El Nino phenomenon, droughts have affected the productivity and output of coffee worldwide, especially robusta coffee, which requires water.

Thirdly, due to wars, sanctions, affecting the global consumption of coffee, causing coffee prices to rise.

Fourthly, on coffee exchanges, financial investors have also focused on coffee, making coffee prices increase recently.

Europe, the largest market for Vietnamese coffee, has regulations banning the import of products related to deforestation. How does this affect Vietnam and what solutions are needed in the future?

Europe's regulations on anti-deforestation and forest degradation have been effective since June 2023. These regulations aim to protect nature and the environment. Therefore, the coffee industry in Vietnam, in particular, and agriculture in general, must support these regulations to demonstrate Vietnam's responsibility towards the goal of environmental protection and nature conservation. This is a challenge but also an opportunity for the Vietnamese coffee industry to develop in the future.

Thank you, sir!