Coffee Craze Forces Asia’s Big Exporters To Buy Brazilian Beans

Coffee consumption in Asia is on the rise, with consumers developing a taste for coffee and turning Asian producers into large buyers. Vietnam and Indonesia are increasingly sourcing coffee from Brazil to meet this demand, as their own beans are more expensive than Brazil’s. This shift is expected to continue, especially after extreme weather and insufficient yields have weighed on global production. The world’s largest coffee trader, Neumann Kaffee Gruppe, is betting on the shift, opening an import office in Indonesia as it expects demand there will eventually be higher than what the nation’s crops can handle.

Indonesian coffee consumption has grown about 4% annually over the past decade, higher than the 2.2% growth expected this year by the International Coffee Organization. Shipments from Brazil to Indonesia, the world’s fourth-largest producer, more than doubled last year, according to Cecafé. The potential for growth is still very large, especially because consumption per capita is lower than in other parts of the world. As coffee-drinking habits flourish, Indonesia’s bean production has mostly stalled, and demand may exceed output within the next five to eight years if the same pace continues.

Shipments from Brazil to Vietnam are also surging, jumping more than sixfold in the 12 months ended in January. Imports from the South American country are serving Vietnam’s instant coffee industry, and some companies have imported beans to honor signed contracts and make roasted coffee as well. Weather is helping bring more imports to the region, with the El Niño phenomenon bringing extreme dryness to Southeast Asia this season, reducing production in Vietnam and Indonesia and causing a spike in local prices. Vietnam coffee is currently trading at more than a $30 premium to Brazilian beans, making South American purchases even more attractive.

Some recovery is expected in both Vietnam and Indonesia’s coffee supply, as higher prices will bring higher revenue to farmers, spurring them to invest in expanding and improving their crops. However, long-term challenges will persist, with the amount of small, family properties making it more difficult to see gains of scale. The big alternative to come onto the market should be Brazil.

Read More @ NDTV

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