Here’s What Vietnam Has to Do With the Price of Your Morning Cup of Joe

Vietnam’s vast stockpile of coffee beans is dwindling, a trend that is expected to push global prices even higher.

Traders surveyed by Bloomberg predict that stockpiles will be cut in half by the end of September compared to the same time last year. Vietnam, the world’s largest supplier of robusta and second-largest coffee producer, is also anticipated to experience a decline in 2022-23.

The diminishing reserves and unfavorable harvest forecasts are occurring at a time when global coffee consumption is recovering from a virus-induced decline. The benchmark robusta price has increased by 17% since the middle of July, when it reached a 10-month low, due to supply concerns from Brazil to Africa.

Robusta, which is utilized by instant coffee manufacturers such as Nestle SA or as a blend in espressos, has made a comeback. The variety, which is typically less expensive than arabica, is in high demand as people seek alternatives to mitigate the effects of inflation.

According to customs data, bean availability in Vietnam has decreased as bean exports rose 17% to 1.13 million tons from January to July compared to the same period last year. The increase in exports has been aided by a better supply of containers and ships, but it may be difficult to maintain given the diminishing inventory levels.

Phan Hung Anh, CEO of Quang Minh Coffee Trading JSC in the southern province of Binh Duong, stated, “We are concerned” about a shortage lasting until early November. He stated that local growers are likely holding only about 2% of their annual output, compared to about 13% a year ago.

After drought and frost reduced Brazilian production, the global coffee market is facing one of the largest deficits in recent memory. Colombia is struggling to recover from crop-damaging rains, while Honduras, Guatemala, and Nicaragua are running out of their 2021-22 harvest supplies. The next season’s crop in Costa Rica is showing signs of stress, and in Uganda, a drought has reduced robusta yields.

Last week, domestic robusta prices in Dak Lak province, which accounts for roughly one-third of the country’s harvest, reached an all-time high of 49,100 dong ($2.10) per kilogram due to a decline in Vietnamese inventories.

The survey estimates that carryover stockpiles will be 200,000 tons at the start of the new season on October 1, compared to an estimated 400,000 tons a year earlier. The output may decrease by 6% to 1.72 million tons in 2022-23, according to the survey. The robusta variety accounts for approximately 90 percent of Vietnam’s coffee production.

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