USDA: Vietnam’s coffee import and export in 2019 – 2020 will decrease due to low competitiveness

Vietnam’s coffee export in 2019-2020 is expected to decrease to 23.5 million bags; lower than the previous report, due to competition from foreign markets. With record low prices, reserves in 2019-2020 and 2020-2021 may be high.

Commerce

Coffee export in the world

COVID-19 has affected global trade supply chains, especially coffee; disrupting transportation and demand after countries enacted large-scale blockages.

Although countries have gradually eased the order to socialize; the COVID-19 pandemic could continue to impact trade until the end of June.

Although global coffee consumption is expected to recover after the spacing order; demand will take a long time to return to pre-pandemic levels. The International Monetary Fund predicts a 3% decline in global GDP by 2020; and in a recent study, the International Coffee Organization pointed out that a 1% GDP fall will cause 0.95% reduction in coffee consumption.

Asiacom's coffee export

Image: Asiacom.vn

Vietnam’s coffee export

Vietnam’s estimated export of coffee in 2019-2020 is reduced to 26.3 million bags; lower than the previous forecast.

Due to the difference in prices of Vietnamese Robusta coffee on the futures market; importers turned to buying from Brazil and Indonesia. Traders also said that the currency devaluation in Brazil and the pressure to sell the upcoming record crop has pushed prices in Brazil down quickly.

Vietnam’s coffee exports in the first 6 months of 2019 – 2020 decreased by 6-7% over the previous year; reaching 12.8 million bags. Germany, the US and Italy continue to be the largest import markets.

Export in major markets in the first 6 months

Vietnam's coffee exports in major markets in the first 6 months

Source: USDA

COVID-19 has spurred changes in global coffee consumption patterns; most notably a temporary shift from non-household consumption to home consumption.

High quality coffee served in coffee shops is blended with higher levels of arabica; while home-grown packaged coffee is often of lower quality with a large percentage of robusta.

This trend can continue after COVID-19 because instability in the global economy can affect disposable income; prompting consumers to replace high-quality coffee products.

Therefore, arabica coffee may lose market share and be replaced by robusta in the short to medium term. It is forecasted that Vietnam’s exports in 2020-2021 will increase slightly to 26.9 million bags on the assumption of higher robusta demand and improved prices.

Export green coffee

Export green coffee by month

Export green coffee by month

Source: USDA

Green coffee exports in 2019-2020 will be reduced to 23.5 million bags; because Vietnam’s robusta becomes less competitive. Exports in the first 6 months decreased 7% from the previous year to 11.9 million bags. For 2020-2021, green coffee export is expected to increase slightly to 24 million bags.

Export of roasted and instant coffee

Forecast of growth in instant and roasted coffee exports is about 5%. The share of bulk exports in the instant coffee market has been steadily decreasing in the face of unstable prices in recent years.

Import

Vietnam continues to import small quantities, both green, roasted and soluble coffee, from Laos, Indonesia, Brazil and the US to serve the high-end coffee retail chain. However, imports in 2019-2020 are estimated to decline to 0.7 million bags due to the impact of COVID-19; and a forecast of stagnant growth in 2020-2021.

Price

Export price

Over the past two years, the monthly export price of green robusta coffee (FOB HCMC) has dropped to a low level for many years; especially from January to April this year. Moreover,The depreciation of the Brazilian real has made the country’s coffee relatively cheaper and affected the global futures market.

Export price of Robusta coffee (by month)

Export price of Robusta coffee (by month)

Source: USDA

Robusta supply in Brazil, Vietnam and Indonesia may tighten in 2020-2021 due to smaller production scale and unfavorable weather conditions; while robusta demand may improve; causing prices to rise again in the coming months.

Domestic prices

Domestic robusta coffee prices

Domestic robusta coffee prices

Source: USDA

The domestic price decline reflects a decrease in export prices; which makes farmers reluctant to sell goods. Farmers expect the farm gate price to be VND 32,000 / kg; however the price has fallen below VND 30,000 / kg in April.

Reserve

Vietnam’s reserves are at a high level; including bonded warehouses and warehouses of traders, exporters and farmers. As mentioned, the low price makes farmers reluctant to sell; therefore making it difficult for traders and exporters to buy coffee for export.

In addition, Vietnam’s coffee is less competitive than Brazil and other countries; leading to lower exports in 2019-2020 and therefore, higher reserves. Forecasting reserves in 2019-2020 will increase to 4.6 million bags and in 2020-2021 at 5.5 million bags.

Source: https://vietnambiz.vn/