Pricey Coffee Is Here to Stay as Hoarding, Heat Hit Vietnam Supply

Coffee prices are expected to continue their meteoric surge due to the hoarding of beans and poor weather in Vietnam, the world’s biggest producer of the robusta variety. Local prices in Vietnam have reached an all-time high this year as farmers and middlemen continue to hold onto beans to avoid missing out on better deals after a weak 2023-24 harvest. This has made it harder for exporters to source supply and sparked a record wave of defaults on existing contracts. Climate change is fueling increasingly erratic weather, and drier conditions are set to compound the squeeze, with a global deficit expected for a fourth year. Vietnam accounts for about a third of the world’s supply of robusta beans, which are typically used for instant drinks and espresso coffee.

Swings in commodity prices take time to filter to the retail level, and smaller gains in the cost of arabica are helping shield some of the blow for coffee drinkers. Tata Consumer Products Ltd., which makes instant coffee and pods, said that robusta prices are likely to stay volatile “for some time.” Vietnam’s shortfall has helped drive benchmark futures in London up around 50% this year, with prices hitting the highest level in at least 16 years. Hot and dry weather that has baked vast parts of the Southeast Asian nation has prompted concerns about the next harvest and the potential for even lower supply.

For now, it’s the hoarding driving prices higher. Some Vietnamese farmers have been relying on income from selling fruit to cover living expenses and production costs, allowing them to keep more coffee beans. Farmers and middlemen have probably failed to deliver between 150,000 tons and 200,000 tons of contracted beans since Vietnam started the 2023-24 harvest in October, which is equivalent to about 10%-13% of the harvested crop.

Read More @ Yahoo

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