With falling demand because of Covid-19, the price of coffee bottomed out in 10 years

Coffee consumption has been reduced due to the Covid-19 pandemic, while the abundant supply has caused the price of coffee in the world market to decline. In the same situation, domestic coffee prices also dropped to the lowest level in the last 10 years.

In the short term, the price of coffee is hard to prosper. Photo: Nguyen Thanh

Demand decreased due to Covid-19

According to a recent report bythe Department of Agricultural Product Processing and Market Development (MARD),in the world market, in March 2020, world coffee prices fluctuated. Compared to the previous month, the price of Robusta coffee delivered in May to London decreased from 39 USD / tonto 1,244 USD / ton.

Brazil entered the seasonal cycle of Arabica coffee trees, contributing to the abundant supply in the remaining months of the 2020-2021 crop, which has put downward pressure on prices in the world coffee market.

Regarding this issue, the Import-Export Department (Ministry of Industry and Trade)saidthe Brazilian Real plummeted to a record low, coffee growers in Brazil boosted sales activities, putting pressure on coffee prices.

According to a report by the Center for Advanced Research in Applied Brazilian Economy (Cepea), the harvest of Robusta coffee in the crop year 2020/2021 has started in Rondonia state, which is the second largest producing coffee state in Brazil.

Brazilian Food Distribution Company (Conab) estimates that Robusta coffee volume in the 2020/2021 crop will range from 13.9 to 16.1 million 60 kg bags, possibly even reaching 16 to 18 million bags if there is favorable weather.

According to the Multinational Investment Bank (Goldman Sachs), global coffee consumption will be reduced by 10% due to the Covid-19 pandemic. Although home consumption may be higher, it cannot compensate for the reduction in consumption at coffee stores and restaurants.

Coffee prices "bottomed out" for 10 years

In the first three months, Vietnam's coffee export volume and value reached 474,000 tons and 801 million USD, down 3% in volume and 5.6% in value compared to the same period in 2019.

Data from the Ministry of Agriculture and Rural Development shows that, up to March 15, Germany, the United States and Italy continued to be the three largest coffee consuming markets of Vietnam with a market share of 15.1% (USD 121.29 million); 10% (80.62 million USD) and 9.5% (76.91 million USD), respectively. The average export price of coffee in the first three months reached 1,692 USD / ton, down 2.8% compared to the same period in 2019.

In the domestic market, the Department of Processing and Agricultural Product Market Informed that in March 2020, the domestic coffee market fluctuated and decreased along with the world market trend.

Compared to February 2020, the price of Robusta coffee in Tay Nguyen provinces decreased by 600 – 800 VND / kg to 30,500 VND-30,700VND/ kg. Compared to the end of 2019, the price of Robusta coffee in Tay Nguyen provinces decreased from 1,600 - 2,100 VND / kg.

The Import and Export Department stated by the end of March 2020, domestic Robusta coffee price has dropped to a record low in the last10 years.

Specifically, on March 30, 2020, coffee prices decreased from 4.8% to 5.7% compared to February 29 to 29,500VND/ kg in Di Linh district, Lam Dong province and 30,000VND/ kg in Cu M'gar district, Dak Lak province. At the port area of Ho Chi Minh City, price of R1 Robusta coffee decreased by 4.9% compared to February 29, to 31,300 VND / kg. Low prices make coffee growers restrict sales and businesses lacksupply for export.

Some experts predict that import and export activities will be delayed everywhere due to the epidemic, which has forced many ports to close and making coffee prices unable to recover quickly.

As the coffee consumption market decreased, the purchasing power was weak due to Covid-19 epidemic, which occurred in the main consuming regions. In addition, governments in many countries, including Europe and the United States, have banned the purchase and sale of coffee, many chains and cafes closed, which is a huge loss for the coffee industry, especially forcoffee growers.

"In the US, the Starbucks coffee chains has declaredindefinitely closed some roasting locations in many states in the US in late March 2020," the Department of Agricultural Product Processing and Market Development stated.