Coffee prices increased three times, many contracts were broken
| Coffee prices peaked, many export businesses worried about not having goods to sell Thanks to high prices, coffee export turnover in the first quarter of 2024 skyrocketed 57,3% |
Prices tripled, link contracts broke
At the expanded Executive Committee meeting of the Vietnam Coffee and Cocoa Association (VICOFA) held on the morning of April 11, Mr. Do Ha Nam – Vice Chairman of VICOFA, Chairman of the Board of Directors of Intimex Group – stated the current reality. Currently, the Vietnamese coffee industry is facing price increases too quickly and at too high a level, leading to widespread competition between buyers and sellers and broken contracts.
Mr. Do Ha Nam said, according to statistics, in March 3, Vietnam exported about 2024 tons of coffee, export turnover was about 185.281 million USD, down 680,86% in volume but increasing. 11,9% in value compared to the same period last year. Calculating the cumulative total for the first 41,1 months of the 6/2023 coffee crop year, Vietnam exported a total of more than 2024 thousand tons of coffee, with a turnover of more than 956 billion USD; Of which, the main export is robusta coffee (over 3 thousand tons), with a turnover of over 825 billion USD.
However, according to Mr. Nam, if in March 3 the domestic coffee price was at 2023 VND/kg, by October 47.000 the price would have increased to 10 VND/kg and is now at 2023 VND/kg.
The rapid and high price increase (nearly 3 times higher) creates many challenges for businesses. Specifically, businesses have to mobilize large capital sources, but banks’ credit limits for businesses have not increased.
In addition, the rapid increase in prices is associated with high risks for businesses purchasing goods for export through agents and traders. Some purchasing agents and businesses in localities with raw materials did not deliver goods on time as stipulated in the purchase and sale contracts for export processing enterprises and FDI enterprises even though the parties had discussed the division. share risks, causing great damage to buyers and discrediting the Vietnamese coffee industry.
“In the history of the coffee industry, prices have never been as high as they are today and can reach 110.000 VND/kg”- Mr. Nam commented and further shared that: He himself received letters about the issue of coffee being in a high-risk situation as well as the issue of credibility in business. These are things that have never happened before.
Supply chain breakdown – A story that needs to be resolved
According to a representative of Neumann Vietnam Co., Ltd. (part of Neumann Kaffee Gruppe), high prices have pushed this business into a difficult position. “We have delayed deliveries and even seriously failed to fulfill contracts, affecting the roasters – customers to whom we supply coffee.”– said the representative.
Regarding the cause, according to this person, the supplier does not respect the signed commitment and this problem is spreading to the entire supply chain as the chain’s cooperation is gradually being broken. Even people who have worked together for a long time. “Failure to respect this contract causes the situation of finding new sources to supply goods at higher prices. This dangerous precedent leads to very harmful things for the reputation of Vietnamese coffee in the world market.”– representative of Neumann Vietnam warned.
According to Neumann Vietnam representative, people breaking contracts has become a precedent and is widespread, while world roasters need goods and they look for alternative sources. “We are very worried about this situation and hope that Vietnamese government agencies will take measures to resolve the current situation”- Neumann Vietnam representative proposed.
Sharing the same opinion, a representative of Nestlé Vietnam said that the company could not buy products because the prices were too high, so they had to buy products from other countries to keep the factory operating stably. “Last year Nestlé Vietnam switched to buying from other countries and this year must do the same to ensure the factory’s production”- Nestlé Vietnam representative added.
Like the two businesses above, a representative of Ngon Coffee Co., Ltd. also affirmed: This year is very challenging and must consider importing coffee from other countries for production.
Acknowledging this reality, Mr. Do Ha Nam said: In 2023, Vietnam imported 200.000 tons of coffee and this year roasting factories in Vietnam are forced to import because the domestic price is too expensive. If this situation lasts and we do not make efforts, there will be an opportunity because even Mr. Nam’s company is having to find supplies from other countries for import and processing.
Mr. Nam said that the current situation cannot be resolved by VICOFA but must be reached at a higher ministry/sector level; At the same time, there must be financial solutions to help businesses purchase early and keep prices stable.
| Mr. Thai Nhu Hiep, Director of Vinh Hiep Company Limited, Vice Chairman of VICOFA:Keep prices stable to ensure benefits for all partiesThe coffee market is no different from year to year, but current high prices are unusual. We are trading at a price of 105.000 – 110.000 VND/kg, possibly even up to 120.000 VND/kg. No one wants prices to increase forever and there must be measures to stabilize prices to ensure benefits for all parties. |
