Recently, rumors suggesting that Vietnam is intentionally hoarding coffee have contributed to driving Robusta coffee prices to their highest levels in 30 years. However, according to the Mercantile Exchange Of VietNam (MXV), these claims are merely rumors affecting market sentiment. The primary factor supporting Robusta prices is the supply shortage in key coffee-growing regions.

For the first time in history, domestic coffee prices have exceeded 92,000 VND/kg.

In the first two months of 2024, Robusta coffee prices on the Intercontinental Exchange Europe (ICE-EU) continuously broke records. According to the Mercantile Exchange Of VietNam (MXV), Robusta coffee prices reached a 30-year high on March 7, closing at 3,381 USD/ton.

Domestically, prices have also been setting new records, with increases even more dramatic than those on the global market. According to data from giacaphe.com, the price of raw coffee beans in Vietnam reached an all-time high, exceeding 92,000 VND/kg on March 8. This new record price is 35% higher than at the beginning of the year and nearly double the approximately 48,000 VND/kg recorded at the same time last year.

In addition to supply disruptions caused by conflicts in the Red Sea region, reports that farmers and traders in Vietnam are intentionally hoarding coffee to wait for higher prices have caused market concerns about a Robusta supply shortage, driving prices to new highs.

International news agencies such as Reuters and Bloomberg have reported that the significant increase in global Robusta coffee prices in early 2024 is due to the hoarding of coffee by Vietnamese farmers and traders waiting for higher prices.

Commenting on the impact of this rumor, Mr. Duong Duc Quang, Deputy General Director of MXV, stated: "Commodity prices, including coffee, are very sensitive to supply and demand rumors, especially when Vietnam is currently the world's largest exporter of Robusta. Therefore, when this information emerged, market sentiment changed quickly and impacted coffee prices even without being verified by actual data."

Is Vietnam Intentionally Hoarding Coffee to Await Higher Prices?

According to MXV, so far, there is no evidence to support claims that Vietnamese farmers and traders are intentionally withholding coffee to wait for higher prices. The coffee supply shortage in the market might be occurring, but it is not due to subjective factors in Vietnam.

Firstly, since the peak of the 2023/24 coffee harvest season in Vietnam, export volumes have remained high compared to previous years. According to data from the General Department of Vietnam Customs, cumulative coffee exports from November 2023 to the end of February 2024 were 9% higher than the same period last year and 22% higher than the five-year average.

Secondly, the coffee shortage is also happening in the domestic market, even though the 2023/24 harvest season has just ended. Specifically, coffee production in Vietnam for the 2023/24 season has been forecasted to remain low due to adverse weather conditions. According to the Vietnam Coffee - Cocoa Association (VICOFA), the 2023/24 coffee production is expected to decrease by 10% compared to the previous season, down to about 1.6 million tons, the lowest level in the past four seasons.

Moreover, low stock levels from the previous season mean that farmers do not have much surplus for export in the new season. The U.S. Department of Agriculture (USDA) estimates Vietnam's coffee ending stocks for the 2022/23 season at 339,000 bags and forecasts the ending stocks for the 2023/24 season to be only 359,000 bags, the third lowest in the past 17 seasons.

Thirdly, in the Central Highlands region, in addition to focusing on coffee cultivation, farmers are increasingly paying attention to other high-economic-value crops such as durian and passion fruit. Compared to these fruit crops, the storage duration of coffee is usually longer. Therefore, farmers also tend to prioritize the transportation of durian and passion fruit first.. 

The Supply from Vietnam Remains a Dominant Market Factor

Rumors about hoarding have significantly influenced Robusta coffee prices on the ICE-EU Exchange, highlighting the crucial role of Vietnamese coffee in the global market.

According to the USDA, Vietnam is currently the world's largest producer and exporter of Robusta coffee. On average, Vietnam exports about 1.6 million tons of coffee annually (equivalent to 26-27 million 60kg bags), more than double the combined Robusta coffee exports of Brazil and Indonesia, which total approximately 11 million bags.

Additionally, the harvest timings in Vietnam and Brazil create a unique market opportunity for Vietnamese coffee in the early months of the year. Typically, Vietnam's coffee harvest lasts from October to the end of January, ensuring that Vietnamese coffee supply is most available in the first months of 2024. Conversely, Brazil, the second-largest Robusta producer, harvests coffee from May to the end of August.

Commenting on the coffee market outlook, Mr. Duong Duc Quang stated: “Vietnam will remain a focal point for the Robusta coffee market in the first half of 2024, before Brazil begins its new harvest. Furthermore, our supply situation and the outlook for the new crop are not very promising, likely driving Robusta prices to remain high in early Q2 2024.”

Source: MXV