According to the Vietnam Commodity Exchange (MXV), at the end of the trading session on August 7, the prices of two coffee products continued to increase sharply. Specifically, the price of Arabica coffee jumped 4.39% to 5,429.98 USD/ton, setting a three-week high; the price of Robusta coffee was also 2.24% higher than the reference price, reaching nearly 4,500 USD/ton. The narrowing USD/BRL exchange rate and concerns about falling temperatures in Brazil pushed prices up.

The Dollar Index rose slightly while the Brazilian Real also strengthened yesterday, causing the USD/BRL exchange rate to weaken to a one-week low, marking the fourth consecutive session of decline. The narrowing exchange rate gap has increased the psychology of limiting coffee sales among Brazilian farmers due to less foreign currency earned, thus reducing supply to the market, raising concerns about supply shortages.

In addition, the market is also worried about the return of frost in Brazil, which also directly affects supply expectations in the world's largest coffee exporting country. The National Meteorological Institute (Inmet) forecasts that the cold air mass expected to enter Brazil's coffee growing regions will cause temperatures to drop on August 10-11. The drop in temperatures raises concerns about frost. The current frost does not have a big impact on the 2024-2025 coffee supply as farmers have harvested nearly 90% of the expected output. However, the next coffee supply is likely to be heavily affected due to the risk of frost damage to coffee trees.

However, the positive outlook for the 2024 coffee crop has been dampened by unfavorable weather conditions. Consulting firm StoneX has lowered its forecast for Brazil’s 2024-25 coffee production to 65.9 million 60-kg bags, down 1.7% from its previous forecast. This is mainly due to a decline in Robusta coffee production. Currently, Robusta coffee bean production is estimated at 21.2 million bags, down 6.8% from the previous forecast.

The Import-Export Department (Ministry of Industry and Trade) forecasts that Vietnam's coffee exports will decrease in the remaining months of the third quarter due to low supply. It will not be until October, when the 2024-2025 coffee harvest begins, that coffee supply will increase again. It is estimated that in the first 7 months of 2024, Vietnam exported 964 thousand tons of coffee, worth nearly 3.54 billion USD, down 13.8% in volume but up 30.9% in value compared to the same period last year.

It is forecasted that Vietnam's coffee exports in the remaining months of the third quarter will decrease due to low supply (Photo: VNA)

In the 2023/2024 crop year, Vietnam's coffee output is estimated at 1.47 million tons - the lowest level in 4 years, down 20% compared to the 2022/2023 crop year (statistics from the Ministry of Agriculture and Rural Development). Coffee output in the 2024/2025 crop year is likely to continue to decrease due to unfavorable weather factors. Thus, if not counting the inventory carried over from the previous year, Vietnam will only have about 200,000 tons left to export from now until September.

However, the Vietnamese coffee industry will benefit from prices. According to Bloomberg, global Robusta coffee prices will fluctuate in a strong and prolonged upward trend due to concerns about scarce supply from Vietnam. According to market assessments, coffee prices will continue to increase until mid-2025 due to supply shortages from major growing regions. According to the International Coffee Organization (ICO), the world may face a shortage of Robusta coffee of up to 35 million bags (60kg/bag) by 2040.

However, the Vietnamese coffee industry is facing significant challenges and changes amid volatile markets and rising environmental pressures. Specifically, the Vietnamese coffee market is facing two main challenges this year: reduced output and increased prices. Prices are rising due to increased demand both domestically and internationally, especially in Southeast Asian countries. On the other hand, adverse weather conditions and supply chain disruptions are contributing to the reduced output.

Vietnam's coffee production is increasingly affected by prolonged drought and rising temperatures, reducing yields and affecting crop quality.