Overview:
Coffee production in 2023/24 was revised down by 3.8 million bags to 27.5 million bags due to unfavourable weather conditions due to climate change and El Niño weather patterns. In addition, the report downgraded coffee production in 2022/23 to 27.2 million bags of green coffee equivalent (GBE) due to unfavourable weather conditions leading to low cherry survival rates and farmers shifting production to more profitable fruit trees. Based on the decline in inventories, the report forecasts coffee exports in 2023/24 at 25 million bags of green coffee equivalent (GBE).
produce
According to the forecast of the Vietnam Meteorological and Hydrological Agency, the El Niño-Southern Oscillation (ENSO) phenomenon is expected to make a comeback in the last three months of 2023. Due to climate change, coupled with the El Niño phenomenon, weather forecasts could be unfavourable for the 2023/24 coffee harvest. Despite the 2023/24 cycle year, the report still lowers the 2023/24 coffee production forecast to 27.5 million bags (GBE), including 26.62 million bags (GBE) for Robusta coffee (Table 1). Robusta coffee production in 2022/23 decreased compared to the previous season, due to unfavourable weather conditions that led to lower cherry survival.
In addition, the planting area in the central highlands showed a downward trend due to crop transfer or intercropping with other profitable fruit trees. In off-cycle years, coffee production is lower than in the previous season. Based on these factors, the report lowered its forecast for total coffee production in 2022/23 to 27.2 million bags (GBE), including 26.3 million bags (GBE) of Robusta coffee (Table 1).
Table 1: Robusta coffee green coffee production from 2020/21 to 2023/24
In response to climate change and the European Union Timber Management Regulation (EUTR), Vietnam's coffee industry is gradually moving towards a green, transparent and responsible development path, aiming to improve its competitiveness in the global market. According to statistics from the Ministry of Crop Production (Ministry of Agriculture and Rural Development), as of 2022, about 26% of the coffee cultivation area in Vietnam has been certified for sustainable coffee production, including 4CUTZ certification, VietGAP, organic certification, Rainforest Alliance, FLO, GlobalGAP, fair trade, and HACCP. These include 45,674 hectares in Dale and 36,620 hectares in Gia Lai. In addition, there is a transition to an organic coffee agroforestry model to support the reduction of greenhouse gas emissions in Vietnam.
consumption
According to statistics from the General Statistics Office (GSO) of Vietnam, in the first eight months of fiscal 2023, Vietnam's catering and accommodation service revenue increased by 15% year-on-year. International visitor arrivals are expected to recover by 84% in Q2 and fully recover in Q4 FY2023, driving strong growth in the F&B sector.
There are about 500,000 coffee shops in Vietnam, including local and other foreign coffee chains, as well as sidewalk cafes. Currently, domestic coffee consumption accounts for 10% of total coffee production, and the Vietnam Coffee and Cocoa Association (VICOFA) is continuing to push to increase domestic coffee consumption, especially ground coffee and instant coffee.
However, with domestic prices continuing to rise and Vietnam's consumer price index (CPI) rising by 3%, costs are likely to constrain consumer demand in the coming months. The reporting company lowered its forecast for domestic coffee consumption in 2023/24 by 200,000 bags to 3.2 million bags (GBE).
trade
Outlet:
Despite rising export prices, Vietnam reported lowering its forecast for total coffee exports in 2023/24 to 25 million bags. According to the General Directorate of Customs and Statistics of Vietnam, coffee exports totaled 27.7 million bags (GBE) in 2022/23, down 4.5% from the previous year due to lower ending stocks in 2021/22 (Figure 1). However, export earnings increased by 3% in 2022/23 to US$4 billion due to higher export prices.
Figure 1: Vietnam's monthly coffee exports
Source: General Directorate of Customs and Statistics of Viet Nam
The EU remains Vietnam's largest export market, accounting for 37% of total exports. Exports to the EU fell by 7% and by 0.3% in value, with 615,000 tonnes and $1.4 billion in exports. Inflation and high interest rates have affected coffee consumers in the EU, leading to a decline in European coffee imports. Exports to Germany, Vietnam's largest export market, fell by 6 percent. Exports to Spain fell by 13 percent and exports to Belgium by a significant 42 percent. In contrast, exports to Italy increased by 6% in 2022/23 and exports to the US by 4% (Figures 2 and 3).
Figure 2: Major destinations for coffee exports
Export of green coffee beans
The report lowered the 2023/24 green coffee export forecast to 23 million bags and the 2022/23 green coffee export estimate to 25.4 million bags due to lower production and lower inventories.
Vietnam exported 17.8 million bags of green beans worth US$2.3 billion in the first eight months of the 2023 calendar year, according to Vietnam Customs data. Compared to the same period in 2022, the volume of exports decreased by 5.8%, but the value of exports increased by 2.4%. Exports to Germany, Spain, Belgium and the United Kingdom declined, while exports to Italy, the United States and Canada increased.
The United States, Japan and Russia. Arab countries' exports fell by 27 percent and 35 percent, to 560,000 bags and $133 million, respectively (Figure 4).
Figure 4: Monthly exports of green coffee beans
Source: Vietnam Customs
Soluble and roasted exports
The report lowered the 2023/24 forecast for soluble coffee and roasted coffee exports to 2 million bags, and lowered the 2022/23 estimate for soluble coffee and roasted coffee exports to 2.34 million bags. In the first eight months of the 2023 calendar year, exports of soluble and roasted coffee increased by 24% to US$530 million, accounting for 18% of total exports, according to Vietnamese customs data. The main export markets for soluble coffee include the European Union, China, Japan, and Indonesia.
Import:
The report raised its 2023/24 coffee import forecast by 170,000 to 720,000 bags to compensate for the decline in domestic supply. Coffee imports in 2022/23 are also expected to be revised up slightly by 50,550,000 bags.
According to statistics from TradeDataMonitor, LLC, Vietnam imported 365,000 bags of green coffee beans in 2022/23, mainly from major markets such as Indonesia, Brazil, the European Union, and Colombia. At the same time, imports of processed coffee products fell to 135,000 bags, with the main sources being Malaysia and China.
Price:
The average export price in 2022/23 reached US$2,441/mt, peaking at US$3,151/mt in September. The main reason for the increase in prices is a decrease in supply, followed by the trend towards the production of high-quality and high-value products. In addition, global economic challenges such as inflation have led to a shift in consumer demand towards lower-cost Robusta coffee. Amid the limited supply of coffee in Vietnam, the increased demand for Robusta coffee has helped to boost prices. Rising fertilizer and fuel prices have also increased production costs.
Figure 5: Export prices of green Robusta coffee
Domestic coffee prices increased by about 3% in 2022/23 compared to the same period last year. The price in September reached VND 68,000 per kilogram, the highest level in the past 30 years (Figure 6). Domestic prices are also affected by the above-mentioned factors.
Figure 6: Local prices for green coffee beans in Robusta
Inventory:
The report sharply lowered its forecast for ending stocks for 2023/24 to 359,000 tonnes. During periods of limited supply, strong export demand led to a significant drop in inventories. High domestic prices, coupled with high interest rates, have also made traders and exporters hesitant to hold stocks. The report also lowered the projected ending stocks for 2022/23 to 339,000 tonnes.
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