The unfavorable weather conditions in the last quarter of 2023 have posed significant challenges for coffee farmers in Vietnam. These challenges, including irregular rainfall and other adverse weather phenomena, have led to a decrease in the survival rate of coffee cherries. According to the United States Department of Agriculture (USDA), the consequences of these conditions extend beyond the current season, with an expected 7.6% reduction in the coffee production forecast to 27.5 million bags for the marketing year 2023/24. This reduction is notable, given that Vietnam is the second-largest coffee producer globally.
The global coffee market is sensitive to changes in production from major players, and Vietnam's reduced output is contributing to an upward trend in coffee prices. The sustained bullish trend in prices, as reported in Tridge's Dec-23 Coffee, Sugar, and Value-Added Products Outlook, indicates the market's response to the supply challenges. The wholesale price of coffee experienced a significant rise to VND 60,000 per kilogram (kg) on November 29, marking a notable 4% increase compared to VND 57,700/kg on October 31. This trend is not only reflects the immediate impact on prices but also indicative of the potential for a more extended period of elevated prices.
Figure 1: Vietnam Wholesale Coffee Prices
The regional variations in coffee prices within Vietnam highlight the localized impact of weather conditions. In the Central Highlands provinces, the price of green coffee rose to VND 58,900/kg, signifying a 2% increase from the previous month. Specific districts like Di Linh, Lâm Hà, and Bảo Lộc in Lâm Đồng noted a slight rise to VND 57,800/kg. While in the Cu M'gar district (Đắk Lắk), coffee was purchased at VND 58,900/kg, marking an increase of VND 400/kg from the previous month. Similar upward price movements were observed in Đắk Nông and Gia Lai provinces.
For coffee suppliers in Vietnam, the current market conditions present both opportunities and challenges. The increased prices offer an opportunity for higher profit margins, but the challenges lie in navigating the uncertainties brought about by unpredictable weather patterns. Tridge Transaction Data Service (TDS) becomes invaluable in this scenario, providing essential insights into buyer lists and real-time price data, enabling suppliers to make informed decisions.
Vietnam's position as the second-largest coffee supplier globally means that its production challenges have ripple effects across the entire coffee market. This becomes particularly significant when considering that other major producers, like Colombia, are also facing issues that contribute to sustained pressure on prices. The global dependence on a few key players, combined with the challenges they are encountering, underscores the delicate balance in the coffee market.
As the Vietnam Meteorological and Hydrological Administration predicted, the El Niño-Southern Oscillation (ENSO) phenomenon persisting into early 2024 indicates a continuation of weather-related challenges. This suggests that coffee prices will likely remain bullish throughout December and into January. Stakeholders in the coffee industry, both suppliers and buyers, can utilize Tridge TDS to stay updated on real-time price data and market dynamics, allowing them to navigate the evolving landscape effectively.