USDA Attache: Vietnam’s 2023-2024 Coffee Crop Pegged at 31.3 Million Bags

CoffeeNetwork (New York) – According to the latest USDA attache report, Vietnam’s coffee production in MY 2023/24 to increase to 31.3 million bags (GBE) due to favorable weather conditions and higher yields.

MY 2022/23 Robusta coffee production witnessed a decline compared to the previous crop due to an off-cycle year, high production costs, and a drop in cultivation area. Industry contacts note that production costs for MY 2022/23 were around USD 1,200 per metric ton (MT) on average, 15 percent higher than MY 2021/22. Higher labor costs and a 70 percent rise in fertilizer prices are the primary drivers behind this increase. As a result, farmers applied fewer chemical fertilizers and supplements and partially switched to organic fertilizers such as manure composts, leading to lower yields and production.

Furthermore, the cultivation area in the Central Highland regions witnessed a downtrend due to crop shifting or intercropping with other profitable fruit trees such as durian, avocado, and passion fruit, especially in the Dak Lak and Gia Lai provinces. Based on these factors, Post revised its estimate for MY 2022/23 total coffee production down by 6 percent to 29.75 million bags (GBE), including 28.74 million bags (GBE) of Robusta.

Based on favorable climate forecasts for the harvesting stage in the Central Highlands, the on-cycle year, and the higher yield of new cultivars, Post forecasts Vietnam MY 2023/24 total coffee production at 31.3 million bags (GBE), 5 percent higher than MY 2022/23, including 30.23 million bags (GBE) of Robusta. Post forecasts MY 2023/24 Arabica production at 1.07 million bags, a slight increase over the last year due to an expansion in the Northern region. Post notes that some industry contacts are even more optimistic in their forecasts and are predicting a potential increase in overall coffee production of 5-10 percent higher than the previous year.

CONSUMPTION Thanks to effective pandemic control and a rapid vaccination program for COVID-19, Vietnam fully reopened its entire economy after March 2022. As a result, the country’s economy quickly recovered and surged in 2022, with Gross Domestic Product (GDP) growth reaching 8 percent, its highest level in over 10 years. The Vietnam General Statistics Office (GSO) estimated an increase in revenue from the accommodation and food and beverage service sectors that was nearly 52.5 percent higher compared to the previous year. The Vietnam travel sector also witnessed an exceptional increase of 271.5 percent in revenue during this time. These positive economic indicators, along the long-term macroeconomic changes, such as increases in disposable income combined with a young and growing population, will continue to support growth in domestic demand. Additionally, due to busy lifestyles among its younger and working populations, more Vietnam consumers are switching from fresh ground or standard instant coffee to instant coffee mixes for convenience. To meet these changes, companies are either building more instant coffee processing plants or expanding the capacity of existing facilities, such as Marubeni, a new joint venture between Netherlands-based Louis Dreyfus with the Polish private-label coffee companies Instanta, Intimex Group, and Olympic. Additionally, manufacturers are developing coffee shop chains and expanding product ranges, especially for specialty varieties to meet rapidly changing consumer demands and preferences in both the domestic and export markets. Based on the above economic data and trends, Post forecasts Vietnam coffee consumption for MY 2023/24 will increase to 3.4 million bags (GBE).

According to the Vietnam Coffee and Cocoa Association (VICOFA), despite being one of the top coffee producing countries in the world, Vietnam has a relatively low coffee consumption rate of 2 kilogram (kg) per capita per year compared to other major coffee producing and exporting countries, such as Brazil (5.8 kg), the United States (4.2 kg), and Finland (12 kg). Vietnam is expected to increase this number to 3 kg by 2023. Moreover, the average rate of domestic coffee consumption was only about 10 percent of total production in the past 10 years, much lower than that of other major exporting countries like Brazil and Indonesia where domestic consumption is 25-30 percent of total output. This gap presents an additional opportunity for Vietnam coffee producers to grow domestic consumption by 5-10 percent in the coming years.

TRADE

Exports
In the last half of MY 2021/22, Vietnam businesses were able to expand exports based on favorable exchange rates and high export demand. Post revised MY 2021/22 exports up to 29.01 million bags (GBE) and MY 2021/22 ending stocks down to 3.58 million bags (GBE). In the first half of MY 2022/23, Vietnam's coffee exports reached 16.97 million bags (GBE), a nearly 3 percent increase according to Vietnam General Statistics Office (GSO) data. Exports to the European Union (EU) market accounted for about 40 percent of total export volume. However, there was a decline of nearly 2 percent, as a plummet in exports to Belgium of 44 percent overwhelmed growth in other key EU markets, such as German, Italy and Spain which saw increases of 10,16, and 18 percent respectively. However, Vietnam exports to other markets did see growth, including Russia (57 percent), Algeria (36 percent), and the United States (23 percent).

The overall export volume for the MY 2022-23 crop is expected to slightly shrink due to lower production than the previous year and difficulties in purchasing. Due to the surge in exports of the first half of MY 2022/23, exporters are now facing difficulties in purchasing new inventory due to high domestic prices. Farmers are also retaining stocks as they wait for prices to rise, adding further challenges to businesses wishing to purchase. Additionally, most coffee exporters have had fewer financial resources for purchases this year because of relatively high interest rates and exchange rate fluctuations. Ongoing high domestic prices are causing hesitancy among exporters in signing future contracts for fear of being unable to balance domestic and export prices. Based on these factors, revised MY2022/23 exports estimate to 28.8 million bags (GBE), a nearly 1 percent decrease compared to the previous marketing year.

Green Bean Exports
Vietnam’s green bean exports, particularly Robusta, grew to 15.28 million bags in the first half of MY2022/23, a nearly 3 percent increase compared to the same period of previous marketing year.

As mentioned in the “Export section”, total exports for MY 2022/23 are estimated to slightly shrink. Therefore, Post revised its forecast for Vietnam MY 2022/23 green bean exports at 25.9 million bags. Post forecasts a decrease of 5 percent in green bean exports for MY 2023/24 to 24.50 million bags, driven by a huge drop in stock and stricter import regulation of EU market.

Soluble and Roasted Exports
Post revised its estimate for MY2022/23 soluble and roasted coffee exports down to 2.9 million bags and forecasts MY2023/24 soluble and roasted coffee exports to increase 3 percent to 3 million bags.

Imports
As mentioned in the “Consumption” section, there is the growing demand for specialty coffee, along with an expansion of coffee chains, supporting imports of high-quality Arabica beans and soluble and roasted coffee. Trade Data Monitor's statistics indicate that most green bean coffee imports to Vietnam come from key markets such as Indonesia, Brazil, Peru, and Germany, while processed coffee products are imported from Brazil, Thailand, Indonesia, Australia, and Belgium. In the first half of MY 2022/23, coffee imports to Vietnam saw a slight rise of 2 percent over the same period of last year. Therefore, Post maintains its estimate of coffee imports at 580 thousand bags for MY 2022/23 and forecasts MY 2023/24 coffee imports at 550 thousand bags.

PRICES Average export prices in the first half of MY2022/23 reached USD 2,294/MT, a slight rise of 1 percent compared to the same period last year.

Domestic coffee prices in the first months of MY 2022/23 grew by approximately 6 percent compared to the same period last year. This also marks the third consecutive year of price rises. In April, prices reached VND 50,400/kg, their highest level since late August 2022

STOCKS Post revised ending stock for MY 2022/21 down to 3.58 million bags. As noted in “Export” section, Vietnam businesses expanded exports in the last half of MY 2021/22 based on a favorable exchange rates and high export demand. This outflow diminished actual stocks, leading the huge drop of 50 percent in ending stock of MY 2023/22. Post revised its estimate of ending stocks for MY 2022/23 down to 1.81 million bags. Post forecasts a slight recovery in MY 2023/24 stocks to 2.76 million bags.