Vietnam coffee production to fall amid unfavorable weather conditions

VIETNAM — According to a Global Agricultural Information Network report from the United States Department of Agriculture’s Foreign Agricultural Service (FAS), Vietnam’s coffee production for the market year (MY) 2023/2024 is expected to reduce to 27.5 million bags of green bean equivalent (GBE).

This represents a 3.8 million bags drop in FAS forecasts due to unfavorable weather conditions.

This forecast aligns with the predictions of the Vietnam Meteorological and Hydrological Administration, which anticipates the return of the ENSO (El Niño-Southern Oscillation) phenomenon in the last three months of 2023.

This unfavorable weather condition is expected to lead to low cherry survival rates, prompting farmers to shift production to more profitable fruit trees, resulting in an estimated export decline to 25 million bags of GBE based on reduced stocks.

The FAS report details that Robusta’s output is projected to reach 26.62 million bags (GBE) for MY 2023/24, compared to 26.3 million bags (GBE) for MY 2022/23, as the  unfavourable weather conditions are projected to lower cherry survival rates.

Furthermore, the cultivation area in the Central Highland regions has witnessed a downtrend due to crop shifting or intercropping with other profitable fruit trees, contributing to this dip in production.

According to the General Statistics Office (GSO), the first eight months of CY 2023 witnessed a 15 percent revenue growth in Vietnam’s food and beverage and lodging services compared to the same period in the previous year.

International tourist arrivals are expected to recover 84 percent in the second quarter and fully recover in the fourth quarter of CY 2023, driving robust growth in the food and beverage industry.

Currently, domestic coffee consumption accounts for 10 percent of total production. Efforts by the Vietnam Coffee and Cocoa Association (VICOFA) to promote higher domestic consumption, particularly consumption of ground and instant coffee, are expected to boost overall consumption.

However, with the continuous increase in domestic prices and a 3 percent increase in Vietnam’s Consumer Price Index (CPI), costs will likely constrain consumer demand in the coming months.

FAS has therefore revised the forecast for MY 2023/24 domestic coffee consumption by 200,000 bags to 3.2 million bags (GBE).

The report also revised its MY 2023/24 total coffee exports forecast to 25 million bags despite increased export prices. However, export revenue in MY 2022/23 increased by 3 percent to US$4 billion due to high export prices.

The total coffee exports in MY 2022/23  reached 27.7 million bags (GBE) according to Vietnam Customs and General Statistics Office data, a 4.5 percent decrease in volume compared to the previous year due to lower ending stock in MY 2021/22.

The European Union (EU) remained Vietnam’s largest export market, accounting for 37% of total export volume, despite a 7% drop in volume and a 0.3 percent drop in revenue, reaching 615 thousand tons and USD 1.4 billion.

Inflation and high interest rates hurt coffee buyers in the EU, resulting in a reduction in European coffee imports, resulting in a 6% decrease in shipments to Germany, Vietnam’s largest export market.

FAS also cut its forecast for MY 2023/24 green bean exports to 23 million bags and predicted MY 2022/23 green bean exports to 25.4 million bags due to reduced production and a drop in stockpiles.

According to Vietnam Customs data, Vietnam exported 17.8 million bags of green beans valued at USD 2.3 billion in the first eight months of the calendar year 2023, representing a 5.8 percent decline in volume but a 2.4 percent gain in value compared to the same time in 2022.

Exports to Germany, Spain, Belgium, and the United Kingdom decreased, while exports to Italy, the United States, Japan, and Russia climbed.

Arabica exports declined 27 percent in volume and 35 percent in value, totaling 560 thousand bags and USD 133 million.

FAS also reduced predictions for soluble and roasted coffee exports in MY 2023/24 to 2 million bags and predicted MY 2022/23 soluble and roasted coffee exports to 2.34 million bags.

 According to Vietnam Customs data, the export value of soluble and roasted coffee increased by 24 percent during the first eight months of the 2023 calendar year, reaching USD 530 million, accounting for 18 percent of overall export value.

 The primary export markets for soluble coffee include the European Union, China, Japan, and Indonesia.

FAS increased coffee import predictions for MY 2023/24 by 170,000 to 720,000 bags to compensate for lower domestic supplies.

The estimated coffee imports for MY 2022/23 have also been upped marginally to 550,000 bags.

According to Trade Data Monitor, LLC, Vietnam imported 365 thousand bags of green coffee beans during MY 2022/23, largely from significant markets such as Indonesia, Brazil, the European Union, and Colombia.

Meanwhile, imports of processed coffee goods fell to 135 thousand bags, with Malaysia and China being primary sources.

In MY 2022/23, average export prices reached USD 2,441/MT, peaking at USD 3,151 per ton in September, owing primarily to lower supply and, to a lesser extent, a tendency toward producing higher-quality and higher-value products.