Global glut pushes down Vietnams coffee export earnings

Since early this year, coffee prices have dropped in both foreign and domestic markets, and no significant change is forecast as the world’s leading coffee producers - Brazil and Indonesia - prepare to enter their coffee harvest season.

Coffee exports falling sharply

According to a report by the Agro Processing and Market Development Authority under the Ministry of Agriculture and Rural Development, coffee exports reached 157,000 tonnes worth US$253 million in July, taking the total to 1.08 million tonnes and US$1.82 billion in the first seven months of 2019. This is a drop of 8.2 percent in volume and 19.3 percent in value compared to the same period in 2018.

The sharp export earnings drop was caused by the price of Robusta coffee falling in London due to a global glut. Head of Agro Processing and Market Development Authority Nguyen Quoc Toan said the price of Robusta coffee in London decreased by nearly US$100 per tonne between July 15 and 17.

In the first half of this year, Germany and the US continued to be the biggest importers of Vietnamese coffee, with the average export price reaching US$1,706/tonne, down 11.6 percent compared to the same time last year.

Here in Vietnam, the coffee price has also decreased. The price of unsorted coffee beans in the Central Highlands has fallen to VND31,900-32,800/kg, and in Ho Chi Minh City to US$1,377/tonne.

No sign of improvement

The Agency of Foreign Trade under the Ministry of Industry and Trade has forecast that the global coffee market will still face difficulties due to oversupply. According to data from IHS Markit, a market research company, global coffee sales are expected to increase 1.8 percent this year, not enough to boost prices. US-China trade tensions will also adversely affect the prices of agricultural products, including coffee.

Stefan Uhlenbrock, a senior commodity analyst from IHS Markit said although global coffee sales are rising, the prices are unlikely to rise at this time. The increase in demand is very small and the oversupply of coffee in the coming months is likely to maintain the current low price, he said.

Feeling more optimistic about the situation, Head of Agro Processing and Market Development Authority Nguyen Quoc Toan expects changes in the current prices in coffee exporting countries will soon push up prices in domestic and foreign markets. In Vietnam, while the amount of inventory is small, coffee storage facilities expect domestic coffee prices will increase to VND35-36 million/tonne, Toan added.

According to Toan, in the long term, quality will decide coffee prices, necessitating policies to help and encourage farmers to produce organic coffee and develop branding at home and abroad.

According to a June 2019 report by the World Coffee Organization (ICO), despite increases in global coffee imports in the first half of 2019, this import growth still lags behinds coffee production growth over the past two years.