It is the middle of the harvest season but coffee prices are still skyrocketing. On international trading floors, Robusta and Arabica coffee prices are continuously setting new records. In Vietnam, coffee prices are heading straight to the historic milestone of 135,000 VND/kg, 2-3 times higher than previous years. Many people in the industry are asking each other: “What is going on?”.
Earning 3 times more profit, farmers get rich thanks to coffee
Dak Song District is one of the major coffee growing areas of Dak Nong Province. At this time, local farmers are very excited because it is the coffee harvest season; not only is the crop good, but the price is also sky high. In Nam Binh Commune (Dak Song District), Doan Ket Agricultural Service Cooperative is an effective production model. The entire cooperative has 150 hectares of pepper and 250 hectares of coffee, of which over 100 hectares of coffee meet 4C standards (sustainable production, social responsibility).
Mr. Luu Nhu Binh, Director of Doan Ket Cooperative, excitedly said: “This year’s coffee crop has only gone about 1/3 of the way, but the joy of the people is doubled or tripled when the price is at a sky-high level. In recent days, the world price has increased sharply, so the domestic price has also increased sharply, currently at 131,000 – 132,000 VND/kg. Compared to the same period last year, the current price is at least 2.5 times higher. This is an unprecedented high price in the local coffee harvest season.”
Mr. Binh added that in recent years, thanks to the application of integrated pest management (IPM) farming and increased use of organic and biological fertilizers, the plants are healthy and disease-free, helping to reduce investment costs while the yield remains stable at over 4 tons/ha. “The coffee crop is good and the price is good, but many farmers are not in a hurry to sell. Because pepper prices were also good before, many people are not under economic pressure to sell young coffee like before,” Mr. Binh said.
Similarly, in the coffee capital of Dak Lak, Mr. Tran Dinh Trong, Director of Eatu Agricultural and Fair Service Cooperative (Buon Ma Thuot City), said: “Farmers have now become tycoons. In one garden, pepper, durian, and now coffee are all priced high. Especially at the current stage, coffee prices are on the rise , at an unprecedented high. Prices fluctuate so strongly that most people do not dare to sell because they are afraid of losing money. Some people with large output will sell in small amounts to test the market to see if the price is real or fake. A few years ago, there was a situation where farmers abandoned coffee to pursue other crops, but now there is no need to worry anymore, everyone is trying to take care of them, and old gardens are replanted.”
According to many farmers and businesses, the production cost of 1 kg of coffee is only 30,000 VND and a maximum of 40,000 VND; while the current average selling price is about 130,000 VND/kg. Thus, farmers earn 3-4 times the investment cost, which is also an unprecedented high profit and enough to make coffee farmers feel happy.
Nga Thanh Trading Company Limited is a local agricultural product purchasing enterprise in Krong No District (Dak Nong). Mr. Nguyen Dac Dat, Director of this company, said: Since the beginning of the week, the world coffee price has increased sharply and continuously caused chaos in the domestic market. Some key enterprises have offered a price of about 130,000 VND/kg, but some local enterprises and purchasing warehouses do not have enough goods to deliver according to the contract, so they have to increase by 1,000 – 3,000 VND to collect goods. This situation also contributes to the increase in domestic coffee prices.
Why is the coffee price fever getting hotter?
As of the morning of November 29, the price of robusta coffee on the London (UK) floor increased for 5 consecutive sessions with a total increase of 778 USD, reaching an all-time high of 5,565 USD/ton. This price is 38 USD higher than the old record recorded on September 26, 2024. Similarly, the price of arabica coffee on the New York (USA) floor also reached a record high of 7,190 USD/ton. The coffee price fever on international floors pushed the price of coffee in the Central Highlands provinces to increase by about 10,000 VND/kg compared to last week. This unexpected price increase made many people in the industry ask each other “what is really happening?”.
From a local perspective, Mr. Nguyen Dac Dat said: The current price fever is really a surprise to most people and no one knows exactly what is happening. However, if we have to find a solution, it is basically due to limited supply. The drought at the beginning of the year and the prolonged rain at the end of the year made the harvest about 2-3 weeks later than the average of many years. At the present time, the harvested area is only about 10-20%. Because they are not worried about the price falling like in previous years, many people are not in a hurry to harvest early but let the coffee ripen before picking, drying and storing. In addition, because coffee is currently of high value, people do not consign it to agents like before but store it at home, and even households with money buy more from surrounding households to store, so the amount of goods traded on the market is very small. Vietnam has no goods to deliver, causing world prices to increase and vice versa.
“The price is too high. I really don’t understand. It’s unprecedented in history,” said Mr. Do Ha Nam, Chairman of the Board of Directors of Intimex Group Joint Stock Company – one of the leading enterprises in the Vietnamese coffee industry. However, as someone who has worked in the industry for many years, he also tried to explain: There are many reasons, but basically supply is still less than demand. The shortage of supply is real. The amount of coffee in stock on international exchanges is not much. It can be seen that the origin is the continuous increase in the price of Arabica coffee on the New York floor. Because this market is worried about the shortage of supply from Brazil, due to the prolonged drought in many growing areas. Besides, there are the macro policies of the new government.
The fever from the New York floor spread to the London floor. As prices increased, coffee farmers limited their sales, causing a more serious shortage. “In addition to supply and demand factors, unusual weather conditions, political and financial tensions, especially the strengthening USD, and the European anti-deforestation regulations (EUDR) also caused coffee prices to fluctuate violently,” said Mr. Nam.
Mr. Nguyen Nam Hai, Chairman of the Vietnam Coffee and Cocoa Association (VICOFA), also said: “Current coffee prices are beyond the imagination of most people in the industry.” Concerns about limited supply due to climate change, especially from Brazil, as well as the economic and financial policies of US President-elect Donald Trump are part of the cause. But perhaps the market is most concerned about the EU’s anti-deforestation regulations. Although the European Parliament recently agreed to the proposal to postpone the application for another 12 months, it is not the EU’s final decision. “The final decision will be made next December; if the EU still applies the EUDR from December 30, 2024, coffee prices will increase sharply, if it is postponed for another 12 months as recently proposed, prices may cool down. If applied, Vietnam will be the country that benefits the most in the EU market,” the head of VICOFA predicted.