Coffee exports to face difficulties in second quarter

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Export coffee price in the first quarter of 2020 reached US$1,692 per ton, decreasing 2.8% percent over the same period in 2019.

Lowest price in 10 years

The Ministry of Agricultural and Rural Development’s report said that in the first three months of 2020, Vietnam’s coffee export volume and value were 474,000 tonnes and US$801 million, respectively, decreasing 3% in volume and 5.6% in value compared to the same period last year. By the end of March 15, Germany, the US and Italy remained Vietnam’s largest consuming markets for coffee, with market shares of 15.1% (US$121.29 million), 10% (US$80.62 million) and 9.5% (US$76.91 million), respectively.

Compared to other billion-dollar agricultural products, the decline in coffee exports in the first three months are assessed quite low. Chairman of the Member Council of Vietnam Coffee Corporation and Vice Chairman of Vietnam Coffee-Cacao Association Phan Xuan Thang said that such a decline was due to enterprises carrying out orders from the end of 2019, so exports were not significantly affected. However, he also said that despite exports being at a high volume, value was not commensurate because of a low export price. Enterprises accepted losses to keep prestige with their partners.

In the domestic market, the Department of Agro-Processing and Market Development (MARD) saidthat in March, the coffee market fluctuated down together with the world market trend. Compared to February 2020, the price of Robusta coffee in the Central Highlands provinces decreased by VND600 - 800 to VND30,500 - VND 30,700 per kg. Compared to the end of 2019, the price of Robusta coffee in these provinces decreased from VND1,600 - 2,100 per kg.

Notably, the Import-Export Department (Ministry of Industry and Trade) assessed that, at the end of March, the price of domestic Robusta coffee has dropped to a record low in10 years. Typically, on March 30, the price of coffee decreased from 4.8 to 5.7% compared to February 29, to VND29,500 per kg in Di Linh district, Lam Dong province and VND30,000 per kg in Cu M'gar district, Dak Lak province. At ports in Ho Chi Minh City, price of Robusta coffee type 1 decreased by 4.9% compared to February 29, to VND31,300 per kg. Low prices make coffee farmers limit selling, so businesses lack supply for export.

Difficult peak in the second quarter

In the first quarter of 2020, the Covid-19 pandemic has not affectedVietnam's coffee exports too much. However, it is forecast that in the second quarter as well as to the end of this year, the difficulties will increase significantly.

The Department of Agro-Processing and Market Development (MARD) analyzed: Currently, consuming markets for coffee decreases, the purchasing power is weak due to the Covid-19 pandemic in the main consuming markets. In addition, governments in many countries including Europe and the US have banned the direct purchase and sale of coffee, many shops and restaurants have closed, which is a great loss for the coffee industry, especially for farmers. In the US, the Starbucks coffee chain announced the indefinite closure of some roasting locations in many states in late March.

Thang assessed that the coffee shops and restaurants are the largest consuming channel at present. Instead of signing a new contract, roasters are now increasingly using inventory. This affects the entire export and production system. Sales contracts of coffee have also reduced a lot.

“The consumption of coffee chains in the world is only about 20% compared to normal. My company is also currently very difficult in offering to partners. In the second quarter, Vietnam's coffee industry may suffer great losses. I am afraid of a very strong price fluctuation during this period when consumption is limited,”Thang said.

Some experts forecast that the import-export activities stagnated everywhere due to the increasing pandemic, which forced many freight forwarding ports to close, making it difficult for the price of coffee to recover quickly. However, if for the long run, the Department of Agro-Processing and Market Development said that in the context of drought and low prices, farmers in many parts of the world, including Vietnam, have converted to other crops, resulting in reduced output. This will be a factor supporting the coffee price in the near future due to concerns about temporary supply disruption.

COVID-19 causes coffee prices to tumble to record 10-year low The first quarter of the year saw the nation export 474,000 tonnes of coffee worth US$801 million, ...

Thang also gave a less pessimistic view when saying: “If the coffee industry tries to surmount difficulties in 2020, 2021 will be a year of breakthrough growth. That is because demand is expected to increase sharply when major cultural and sport events in the world are simultaneously organized again after the pandemic.”