Decoding coffee prices

On December 25, according to a reporter from Nguoi Lao Dong Newspaper, many localities in Dak Lak – the coffee capital of the Central Highlands – have almost finished harvesting but the amount of goods sold has decreased sharply compared to the same period in 2023. Although the purchasing price is still very high.

Farmers sell in moderation

Coffee agent Duong Van Dung (Ea Ktur commune, Cu Kuin district, Dak Lak province – one of the purchasing agents at high prices in the Central Highlands) lamented that at this time last year, on average, each day he purchased more than 200 tons of green coffee, but currently agents can only buy about 100 tons per day.

According to Mr. Duong Van Dung, dealer owner, there are many reasons leading to the above situation, such as coffee ripening later, and adverse weather affecting harvesting and drying. In particular, the prices of other agricultural products such as durian, pepper, areca nuts… have increased in recent times. Many farmers have abundant income so they do not need to sell coffee immediately, leading to a large amount of goods on the market. scarce. “Coffee prices fluctuate strongly and are determined by the world market. We do not dare to store goods, but we will buy whatever we buy” – Mr. Dung shared.

Talking to us, Mr. Tran Van Ban (living in Krong Pak district, Dak Lak province) said his family has more than 2.5 hectares of coffee, almost finished harvesting. With an output of about 10 tons of green coffee and an average price of 120,000 VND/kg, Mr. Ban’s family can earn a profit of nearly 1 billion VND. However, he only sold about 2 tons, the rest was stored in storage waiting for prices to increase. “Last durian crop, my family earned more than 500 million VND, enough to cover expenses and reinvest so we don’t have to worry about selling coffee early” – Mr. Ban shared.

In Gia Lai, Mr. Nguyen Huu Long, Director of Vietnam Coffee Academy Joint Stock Company – VCA, also said that all the coffee in the area where he lives has been harvested, but farmers only dry it and store it, not yet. Consider selling immediately. Most people wait until Tet to consider selling wholesale. Currently, only households that do not have a drying yard sell all their coffee fresh right after harvest. The remaining amount is sold no more than 40% of the output to cover the costs of harvesting, watering, and celebrating Tet.

Also according to Mr. Long, last year, when the coffee price reached about 60,000 VND/kg, a record high at that time, farmers after harvesting were happy to sell it massively. However, the price then continued to increase, many people regretted it. Learning from last year’s experience, this year even though the coffee price in the middle of the harvest season increased to 130,000 VND/kg and then decreased to about 10,000 VND/kg, many farmers are still not in a hurry to sell but continue to wait for the price to increase again.

“Agents and roasters hope for prices to decrease, while farmers wait for prices to increase. At the current price, about 120,000 VND/kg, most domestic roasters only buy goods in batches for immediate use. , instead of hoarding, because prices are too high compared to previous years” – Mr. Long said.

Mr. Le Duc Huy, Chairman of the Board of Members of 2-9 Dak Lak Import-Export Company Limited, commented that this year’s coffee market has had major price fluctuations in the context of many changes in global politics. Therefore, he advised farmers to sell coffee regularly according to spending needs, avoid speculation or borrowing to store goods, because in general, coffee prices are at the highest level in the past 50 years.

Businesses face many risks

From the perspective of exporting enterprises, Mr. Phan Minh Thong, General Director of Phuc Sinh Joint Stock Company, said that farmers storing coffee waiting for prices to increase greatly affects export activities. From the beginning of the season until now, coffee export output of businesses has decreased by 80% because there is no goods, and importers also do not buy goods at any cost. “Coffee prices are too high, importers don’t have the money to buy enough goods like before. They don’t store goods but “eat by measure”, buy whatever they need” – Mr. Thong explained.

Not having goods to sell makes it difficult for businesses because revenue has dropped sharply while fixed costs cannot be adjusted accordingly. However, with more than 20 years of experience in the agricultural product industry, Mr. Thong believes that it is normal for coffee prices to increase, farmers hoard goods and when the price drops, they rush to sell. “Previously, around 2015-2016, the pepper industry’s golden age used to have a price of 220,000 VND/kg but farmers didn’t sell it and then the price plummeted, the bottom price was only 36,000 VND/kg” – Mr. Thong said.

Mr. Le Duc Huy also admitted that coffee business today is much more challenging than before because of sharp fluctuations in prices and increased financial costs. Companies need 2-3 times more capital to ensure product volume than in previous years. Therefore, businesses must be very careful in managing costs and risks.

In addition, Mr. Huy expressed concern that the demand for Vietnamese coffee roasting is clearly decreasing over the same period, because some businesses have switched to using Brazilian Robusta coffee. However, he hopes that in early 2025, demand for Vietnamese coffee in Asian countries will grow stronger and businesses will prioritize using Vietnamese Robusta coffee.

Mr. Thai Nhu Hiep, Vice Chairman of the Vietnam Coffee – Cocoa Association (VICOFA) and Chairman of the Board of Members of Vinh Hiep Co., Ltd., said that current coffee businesses have learned from last year’s experience when signing sales contracts. “emptied” the coffee early but failed to deliver the goods, leading to huge losses. Currently, businesses wait to buy enough goods before selling. On the farmer’s side, psychology also changed after selling early and getting caught short last year. With the current price of about 120,000 VND/kg, many farmers are still not satisfied because they compare profits from coffee with other crops such as durian or Arabica coffee. In particular, this year many farmers in the Central Highlands have abundant financial resources thanks to durian, passion fruit and by-products such as areca nuts, so there is no need to sell coffee in a hurry.

A bright spot in the coffee industry recently is the increase in processed coffee exports. In the first half of December 2024, Vietnam exported 1,521 tons of processed coffee, earning 33.7 million USD, with an average export unit price of more than 22,000 USD/ton – 4.5 times the price of green coffee. . Mr. Hiep said the majority of businesses export instant coffee, while businesses with raw material areas also have advantages to export roasted and ground coffee with higher value.