Asia Crop Shortages May Keep Global Coffee Prices High

People had hoped that the large exports from major Asian coffee-producing countries could alleviate the strong upward pressure on Robusta coffee prices, but this hope is rapidly fading.

Vietnam produces coffee that accounts for about one-third of the global supply, mainly used for instant beverages and espresso blends.

However, before the coffee harvest season that began in October, the country's coffee-growing regions were severely hit by drought and weeks of heavy rain.

Trinh Duc Minh, the chairman of the Buon Ma Thuot Coffee Association located in Dak Lak, Vietnam's largest coffee-growing province, stated that extreme climate and the reduction of coffee cultivation areas will lead to a decrease in the country's harvest by about 10% to 15% this season.

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According to the United States Department of Agriculture, Robusta coffee will account for more than 95% of Vietnam's coffee production in the next season.

The growing popularity of instant coffee and take-away coffee, coupled with climate impacts on supply, has led to more than double the price of Robusta coffee in the past year.

Now, Robusta coffee is almost as expensive as high-grade Arabica coffee, whose prices have also risen significantly.

Large coffee trader Volcafe Ltd. predicts that there will be a severe shortage of global Robusta coffee in the 2024/25 season starting from October, marking the fourth consecutive year of shortages.

Robusta coffee prices have surged in the past year.

Indonesia's Robusta coffee accounts for about one-tenth of the global supply, and the country's growing domestic demand limits its coffee exports to the global market.

Moelyono Soesilo, the head of downstream coffee at the Indonesian Coffee Exporters and Industries Association, said that this year's production could reach 10 million bags (60 kg per bag), 14% higher than in 2023.

However, he stated that due to the surge in domestic consumption in Indonesia, exports might stabilize at around 250,000 tons.

Robusta coffee may continue to gain market share because it is more resistant to heat and diseases than Arabica coffee—although both types of coffee beans still face significant climate risks.

This is bad news for global coffee drinkers, who seem to be facing rising coffee prices for some time.

Daryl Kryst, Assistant Vice President of Commodity Execution and Sales at StoneX, a commodity brokerage firm, said that continuous rainfall means that Vietnam's exports, which usually start in early November, will be delayed until early December or later.

"We do indeed expect (Robusta) coffee prices to retreat, but this may not be seen until early next year."