Coffee lovers set for price pain

Shrinking supply: A worker fills a bag with coffee at a store with imports from Brazil, Colombia and Vietnam in Buenos Aires. The global coffee market is facing one of the biggest deficits in recent memory after drought and frost slashed Brazilian output. — AP

HO CHI MINH CITY: Vietnam’s vast hoard of coffee beans is shrinking, a phenomenon that is set to push rising global prices even higher.

Stockpiles will halve by the end of September from a year earlier, according to the median estimate in a Bloomberg survey of traders.

Output from Vietnam, the world’s largest robusta supplier and second-largest coffee producer, is also expected to drop in 2022-2023.

The dwindling reserves and poor harvest outlook come at a time when global coffee consumption is recovering from a virus-induced slump.

Benchmark robusta prices have surged 17% from a 10-month low in the middle of July on supply worries from Brazil to Africa.

Robusta, used by instant coffee makers including Nestle SA or as a blend in espressos, has been making a comeback.

The variety, normally cheaper than arabica, is in strong demand as people look for alternatives to mitigate the impact of rising inflation.

In Australia, known for its coffee snobbery, supermarket Coles Group Ltd said its A$1 (69 US cents or RM3.10) in-store coffee had “never been more popular”.

That’s a stark shift in a nation that prides itself on its cafe culture and where people often fork out A$5 (RM15.51) for a “flat white”.

Bean availability in Vietnam has fallen as shipments rose 17% to 1.13 million tonnes in January-July from a year earlier, according to customs data.

The increase in exports has been aided by an improving supply of containers and ships but may be difficult to sustain, given the shrinking stockpiles.

“We are worried” about a shortage through early November, said Phan Hung Anh, chief executive of Quang Minh Coffee Trading JSC in the southern province of Binh Duong.

Local growers are probably holding only around 2% of their annual output, compared with about 13% a year earlier, he said.

The global coffee market is facing one of the biggest deficits in recent memory after drought and frost slashed Brazilian output.

Colombia is struggling to recover from crop-damaging rains, while Honduras, Guatemala and Nicaragua are running out of supplies from the 2021 to 2022 harvest.

Costa Rica’s next-season crop is showing signs of stress, and a drought has cut robusta yields in Uganda.

The slump in Vietnamese inventories pushed domestic robusta prices in Dak Lak province, which accounts for about one-third of the country’s harvest, to a record high of 49,100 dong (US$2.10 or RM9.42) a kg last week.

Carry-over stockpiles are seen at 200,000 tonnes at the start of the new season on Oct 1, compared with an estimated 400,000 tonnes a year earlier, according to the survey. — Bloomberg