Stock It Up!: Why Your Daily Cup Of Coffee May Soon Cost More | Explained

The highest levels in 45 years have been witnessed by Robusta coffee prices, as reported by the International Coffee Organisation (ICO), which noted a significant 17% surge in wholesale prices during April alone.

Vietnam, the largest producer of Robusta coffee, is grappling with substantial supply challenges due to poor harvests in recent seasons. The ongoing supply difficulties in Vietnam were highlighted by the ICO, attributing them to drought and a transition among farmers from coffee to the increasingly popular durian fruit.

Vietnam's robusta coffee production has been dwindling due to several factors:

• A shift among farmers from coffee to durian cultivation, driven by rising demand for the fruit in China. Last year, Vietnam's durian exports to China totalled $2.3 billion, a figure expected to increase to $3.5 billion this year.
• Challenges in finding suitable land for coffee cultivation due to efforts to curb deforestation.
• The impact of droughts was exacerbated by the El Nino phenomenon on Vietnam's coffee production, with prolonged heatwaves damaging crops and raising concerns about global shortages.

The surge in coffee prices is further propelled by increased consumption observed in Asian countries. From October 2022 to September 2023, coffee consumption in the Asia-Pacific region experienced a notable uptick, reaching 44.5 million bags-an increase of 12% compared to the previous four years-constituting over 25% of global coffee consumption.

Moreover, disruptions in shipping routes due to attacks on ships in the Red Sea have led to longer journeys for vessels. European roasters are also stockpiling coffee ahead of a new EU law banning beans grown on deforested land, further straining the supply chain.

Impact on Coffee Prices

Domestic coffee prices in Vietnam have surpassed VNĐ130,000 per kilogram, exceeding the price of black pepper. Vietnam's coffee exports have significantly increased, with the average export price rising by 48% compared to the previous year, as reported by NDTV Profit.

Statistics from the Vietnamese General Department of Customs show that as of April 15, Vietnam exported about 660,000 tonnes of coffee, valued at over $2.23 billion. The average export price of coffee in the first quarter of 2024 reached $3,289 per tonne-a 48% gain from the same period last year. In the first half of April alone, the average export coffee price soared to $3,790 per tonne.

Global market prices have also risen, with the May robusta LRCc2 futures contract hitting an all-time high of $5,999 per ton and the May Arabica KCc1 reaching $4,186.5. Despite the high prices, supply constraints and low stockpiles are expected to reduce export volumes in the coming months, as reported by First Post. Farmers in Vietnam's Central Highlands are facing challenges due to severe drought and plantation restructuring.

Robusta Coffee Farmers in South India Benefit from High Prices

Robusta coffee farmers in South India are experiencing record-high prices for their produce, with farmgate prices reaching ₹172 per kilogram in the Wayanad market-a significant increase from ₹115 per kilogram during the same period last year.

Weather-related factors, including a decline in production in Vietnam and Indonesia, have contributed to the rise in prices. Additionally, the Arabica variety, traditionally priced higher, is now selling at a lower rate compared to Robusta due to its limited availability.

Despite challenges such as erratic rainfall affecting crop yields, coffee farmers in India remain optimistic about prospects, emphasizing the need for sustainable practices to mitigate the impact of climate change on coffee cultivation, as reported by First Post.

Data from the Coffee Board of India reveals that coffee production in India for the fiscal year 2022-23 amounted to 3,52,000 tonnes, with Robusta coffee contributing 2,52,000 tonnes to the total output. India's coffee export revenues have witnessed a significant increase during the ongoing coffee season, rising to ₹5,279 crore from ₹3,982 crore recorded during the corresponding period in the previous season.

In 2022, India imported $169M in Coffee, mainly from Indonesia ($74.4M), Vietnam ($62.7M), Uganda ($17.9M), Honduras ($3.65M), and Guinea ($2.39M).