MILAN – On 30 May, USDA Foreign Agricultural Service released its new coffee annual report on Vietnam. The document paints a far less dramatic picture than the one that has emerged in recent weeks according to other qualified trade sources. USDA experts even raised their previous estimate for the 2023/24 crop by more than 1.5 million bags to 29.1 million, up from 28.3 million in 2022/23.
Production of the Robusta variety, of which Vietnam is the world’s largest producer, is now estimated at 28 million bags, up from 27.3 million in 2022/23. The Arabica crop rose by 10% to 1.1 million bags.
In 2024/25, production will decline slightly to 29 million bags, of which 27.85 million will be Robusta and 1.15 million Arabica. Exports will fall to 26.5 million, from a 26.85 million forecast for this year.
In a far more pessimistic forecast earlier in the week, the Swiss coffee trader Volcafe predicted a sharp drop in next year’s crop to just 24 million bags, the lowest level for Vietnam in 13 years.
One should note that these are these are all preliminary estimates and that the 2024/25 harvest will start in late autumn..
Furthermore, Usda’s specialists visited the production areas in April, when the impact of the drought probably appeared less severe than today.
According to the report, total coffee area in Vietnam is expected to remain stable at around 600,000 hectares over the next several years. Farmers in the Central Highlands region have diversified away from coffee cultivation to add, or switch to, higher earning crops such as durian and passion fruit. Farmers can earn twice the income growing durian they can growing coffee. However, higher coffee prices have helped stabilize coffee area and coffee remains an important crop in highland provinces such as Lam Dong and Dak Lak.
Farmers and other contacts report that high temperatures and draughts have negatively impacted coffee production in MY2023/2024. These weather conditions are expected to become more frequent over time due to climate change. Low forest cover rates and falling groundwater levels in some areas also pose long term challenges to coffee production.
Forest cover helps slow evaporation, and many coffee farms rely on wells for irrigation. The rainy season came late in 2024 and Vietnam experienced above average temperatures in many areas this year. During visits to coffee production areas in April 2024, irrigated and shaded coffee fields looked generally in good condition, while coffee plants in exposed fields lacking irrigation appeared water stressed. Farmers have succeeded in minimizing the impact of adverse weather conditions this year, but current production levels may be difficult to maintain in the future if such conditions continue.
The provincial Department of Agriculture and Rural Development (DARD) and Western Highland Agriculture and Forest Science Institute (WASI) have developed strategies to maintain and improve sustainable coffee production, such as replacing old coffee trees with new varieties, encouraging intercropping to increase shade and water retention, adopting water saving irrigation systems, and helping coffee farmers certify their farms to obtain higher prices.
WASI provides around 4 to 5 million coffee plants to farmers annually. It has 22 high yield, drought, and nematode resistant Robusta varieties, and two late-maturing varieties (harvested in January and February). The World Bank Vietnam Sustainable Agriculture Transformation project (VnSat) helped upgrade 32 coffee nurseries (11 state nurseries and 21 private nurseries) to provide farmers access to improved coffee varieties.
The central government coffee re-cultivation program provides credit to farmers to replant old low yield coffee with new varieties. According to Vietnam’s Ministry of Agriculture and Rural Development (MARD), approximately 130,000 hectares of old coffee farms were replanted by new plants and/or grafting between 2015-2021. The program has helped increase coffee yields to 2.8-3.0 tons/hectare. MARD plans to replant an additional 100,000 hectares in 2025. According to MARD, approximately 35 percent of coffee production area has been replanted.
Approximately 30 percent of the total coffee area in the highland region is mixed with other crops. Intercropping coffee cultivation with a reasonable density of shade providing crops such as pepper, avocado, durian, and peach can reduce the effects of hot temperatures and diseases. These crops can also provide additional income for coffee farmers. Fully replacing coffee with fruit trees can require a 4-5 year wait before the first harvest. With intercropping, farmers can maintain income from coffee while adding other crops to diversify and increase revenue. Intercropping can also reduce the risks of price and market fluctuations, helping stabilize coffee area. Local agricultural officials are encouraging farmers to expand use of intercropping for these reasons.
Post estimates that coffee consumption will increase to 3.6 million bags in MY2024/25. Estimated MY2023/24 coffee production is raised to 3.45 million bags on strong demand.
Coffee exports reached 15.94 million bags (GBE) in the first half of MY 2023/2024 according to customs data, a 7 percent decrease from MY 2022/2023. Customs data shows a large drop in exports to major markets, such as Belgium (down 40 percent), United States (down 20 percent), and Germany (down 17 percent). However, exports to some other markets increased, including Spain (up 33 percent), Japan (up 28 percent), and Algeria (up 23 percent).
Post raised forecast MY2023/24 exports to 26.85 million bags (GBE) based on trade statistics and strong coffee prices. Vietnam businesses were able to expand exports in the last half of MY 2023/24 thanks to high export prices. However, coffee businesses are facing potential difficulties in purchasing for future exports due to high domestic prices.
Some farmers are also retaining stocks in anticipation of further price increases. Coffee exporters are hesitant to sign future contracts for fear of being unable to balance domestic and export prices. The Vietnam Coffee and Cocoa Association (VICOFA) predicted that the turnover of coffee export in CY 2024 will reach $5 billion USD.
Post raised estimated MY 2022/23 coffee bean exports to 25.947 million bags based on Vietnam Customs data.
Vietnam’s green bean exports reached 14.75 million bags in the first half of MY2023/24, down 4.4 percent compared to the same period in the previous marketing year (Figure 3). Post estimates green bean exports in MY2023/24 at 24.85 million of bags (GBE) based on trade statistics and trends. Post forecasts green bean exports in MY2024/25 at 24.4 million bags based on continued high export prices and strong demand.
Based on trade statistics, exports of roasted and soluble coffee in the first half of MY2023/2024 increased 16 percent compared to the year before. Estimated MY2023/24 soluble and roasted coffee exports are unchanged at 2 million bags (GBE). The high export price of green beans has caused headwinds for domestic coffee processors. Post forecasts that soluble and roasted coffee exports will increase slightly to 2.1 million bags (GBE) in MY 2024/25.
Average export prices in the first half of MY2023/24 reached $3,244 a ton, up 155 percent compared to the same period last year (Figure 4). High global demand and concerns about harvest losses in Brazil and Indonesia have pushed prices higher. High export prices benefited Vietnam’s coffee farmers and industry, raising local prices.
Domestic coffee prices were 170 percent higher in the first half of MY2023/24 compared to the year before. In April, prices reached more than VND 100,000/kg, setting a new record (Figure 5). According to contacts, high coffee prices have caused many farmers to store coffee beans after harvest rather than selling immediately in hopes of higher future prices. Farmers who use intercropping prioritize the sale of perishable fruit (durian, passion fruit, avocado, etc.), and store coffee for longer.
