PLEIKU: Vietnamese coffee farmers have faced severe challenges this year due to the worst drought in nearly a decade, sparking concerns over potential increases in espresso prices worldwide. Despite some farmers successfully mitigating the impact of the drought, forecasts for the upcoming harvest season remain bleak, highlighting a potential decline in coffee output and a corresponding rise in global coffee prices.
Vietnam, the world’s second-largest coffee producer, has experienced a significant decrease in expected output due to extreme heat conditions affecting the Central Highlands coffee-growing region from March to early May. The Mercantile Exchange of Vietnam (MVX) has projected a 10-16% decline in coffee production for the next season. Nguyen Ngoc Quynh, the deputy head of MVX, emphasized that the severe weather had substantially impacted the region’s coffee yields.
However, a recent return of rains has provided some relief, boosting optimism among farmers and agricultural officials. Yet, it remains uncertain if the improved weather will sufficiently enhance coffee output to counteract the predicted drop and stabilize the prices of robusta beans, which are primarily used in espressos and instant coffees. Vietnam is the leading global producer of robusta beans, making these concerns particularly significant for the global coffee market.
One farmer, Nguyen Huu Long, who manages a 50-hectare coffee plantation in Gia Lai, one of Vietnam’s top coffee-producing provinces, remains optimistic. Despite the grim forecasts, Long expects his farm’s output to increase. He attributed his success to innovative farming techniques, such as keeping the soil moist by covering it with leaves and allowing trees to grow for decades instead of the local practice of cutting them after a few years. This approach enables the plants to develop deeper roots, giving them better access to underground water reserves. Additionally, his farm’s use of rainwater and fertilizers has helped sustain production.
Similarly, Tran Thi Huong, a tenant farmer in another plantation near Pleiku, utilized abundant water reserves from local canals to keep her plants irrigated during the heatwave. Despite the drought, she expects her coffee output to remain stable, even though the coffee cherries are smaller than in previous years. Huong’s timely use of biopesticides also helped combat an increased presence of pests due to the extreme weather conditions.
These optimistic reports align with projections from the United States Department of Agriculture (USDA), which predicts that Vietnam’s coffee harvest will remain roughly steady compared to the current season, offering a less pessimistic outlook than domestic forecasts.
Nonetheless, the potential impact on coffee prices globally remains a concern. Wholesale prices for coffee in Vietnam and robusta futures traded in London have reached record highs, driven by an underwhelming harvest and fears about the next season’s output following the drought. Although consumer coffee prices have seen limited inflation, with only a 1.6% increase in the European Union in April and 2.5% in Italy, there is an indication that these costs may start to rise as roasters pass on the increased costs to consumers.
The uncertainty surrounding Vietnam’s coffee output is compounded by concerns over insufficient rains or excessive downpours before the October harvest season, which could further reduce yields. Additionally, many farmers are shifting their focus from coffee to durian, a tropical fruit in high demand in China, thereby reducing coffee supply and increasing their leverage in the market.
Le Thanh Son of Simexco, one of Vietnam’s largest coffee exporters, noted that farmers now have the financial means to hold onto their goods, potentially keeping high wholesale prices stable for an extended period. This situation underscores the delicate balance between supply, demand, and pricing in the global coffee market, with significant implications for espresso lovers worldwide.
