Export businesses struggle when coffee prices increase, what does the Coffee Association recommend?

Processing enterprises are struggling

Coffee growers in many localities are very excited when they reap high prices. However, for export businesses, this is a sad business year.

Mr. Nguyen Ngoc Luan, founder of agricultural coffee brand Meet More (Hoc Mon district, Ho Chi Minh City), said that the daily increase in fresh coffee raw material prices has had a great impact on economic production activities. business of the enterprise.

According to Mr. Luan, since mid-June 2023, coffee prices have shown signs of increasing from 40,000 – 45,000 VND/kg, then to 50,000 VND/kg. Each price change lasts for several months. But after Tet, prices increased rapidly and unusually high. When raw material prices increase, Meet More as well as other coffee producers and processors are greatly affected by previously signed export orders.

“Coffee prices continue to increase. In early March, the coffee price was 86,000 VND/kg, a few days ago it increased to 91,000 VND/kg… Currently the price is 95,000 VND/kg. Prices increased rapidly, making it impossible for businesses to keep up.” Mr. Luan shared.

Normally, the time from signing the contract to delivery is about 7 months. At the time of signing the order, the price fluctuated around 50,000 – 60,000 VND/kg, but now the input price has increased to 90,000 – 95,000 VND/kg. However, currently businesses cannot increase selling prices because exchange rates have increased and logistics costs have also increased. “If we increase the price of goods, it will be almost impossible to sell the goods. Therefore, businesses have to cut all profits, even make up for losses on previously signed large orders.”Mr. Luan emphasized and added that currently the business is having to refuse many orders.

“We can only buy raw materials in small doses to complete orders. Since the beginning of the year, many foreign partners have come to buy goods, but we have all refused, because if we accept more, we will incur more losses, unless the partner is willing to increase the price. Enterprises are trying to avoid losses until June 2024. Mr. Luan is worried.

On the other hand, demand for coffee increased but sales volume was small. According to Mr. Phan Minh Thong, Chairman of Phuc Sinh Group, prices are high so growers hoard goods and do not sell them. Traders do not have enough goods to deliver to processors, and businesses lose money because they buy high and sell low.

“With coffee price Raw materials are around 95,000 VND/kg currently, companies estimate losses of tens of millions of VND per ton of processed coffee. This number increases to tens of billions of dong if the amount of goods to be delivered is about 1,000 tons,” Mr. Thong shared.

Many agricultural exporters believe that with current historic peak prices, they cannot buy goods, not to mention some suppliers do not deliver due to price fluctuations.

What does the Coffee Association recommend?

Mr. Nguyen Nam Hai – Chairman of the Vietnam Coffee and Cocoa Association (Vicofa) acknowledged that coffee prices are at the highest level ever. “There has never been a year when coffee prices have been above 95,000 VND/kg. This is a positive and favorable signal for people after many years of low coffee prices.”– Mr. Hai assessed.

Regarding the reason for the increase in coffee prices, according to Mr. Hai: Firstly, due to low inventory for the 2022 – 2023 crop. As early as July 2023, businesses had a shortage of goods. The shortage continues into the 2023 – 2024 crop year.

Second, the impact of climate change, the El Nino phenomenon, causes drought throughout global coffee growing regions. Particularly in Vietnam, in the 2023-2024 crop season (from October of the previous year to September of the following year), the output loss is about 10%.

Third, military conflicts around the world and tensions in the Red Sea region have caused shipping costs and many other costs to increase, pushing up coffee prices. Finally, many financial speculators around the world have chosen coffee (after oil and gold) to speculate, causing coffee prices to increase sharply.

Forecasting the coffee market in the near future, Mr. Hai said that prices will continue to increase. Therefore, Mr. Hai recommends that processing enterprises, coffee export Must closely monitor market developments and balance product sources. If previously signed forward export contracts, in the current context, to reduce the risk of loss, export enterprises should buy immediately and sell immediately instead of signing forward sales as before.

“In recent days, coffee prices have increased day by day. If a business signs a forward sale, losses cannot be avoided.”Mr. Nguyen Nam Hai acknowledged and added that in the coming time the association will continue to meet with coffee processing and export enterprises to update information and issue warnings.