Latte Lovers Beware: Vietnam’s Coffee Crisis May Raise Prices!

Latte Lovers Beware: Vietnam's Coffee Crisis May Raise Prices!

Vietnam, the leading producer of robusta coffee beans, is facing a critical supply shortage that could drive up the cost of your daily latte even further. The prices of robusta coffee futures have surged by 50% in London, reaching a nearly two-decade high due to dwindling harvests in Vietnam, the source of a third of the world’s robusta beans. The ongoing months-long drought has severely impacted the country’s robusta coffee production, pushing the prices to 16-year highs.

Tran Thi Lan Anh, the deputy director of Vinh Hiep Co., a prominent Vietnamese exporter, indicated that the cost of coffee beans may escalate to $5.89 per kilogram, a significant jump from the current $5.13 level. With one kilogram of coffee beans yielding approximately 120 to 140 cups of coffee, consumers may soon feel the pinch in their morning routines.

The unexpected shortfall in the 2023-2024 harvest season has further exacerbated the situation. Estimates from traders suggest that Vietnamese farmers failed to deliver between 150,000 to 200,000 tons of contracted beans, representing only a fraction of the harvested crop. The main culprit identified for this crisis is the El Niño weather phenomenon, which has led to warmer and drier conditions in Vietnam, hindering the coffee production process.

As El Niño intensified, temperatures soared, affecting Vietnam’s provinces and causing a prolonged drought that has jeopardized the country’s ability to meet the global demand for coffee. The typically required tropical climate for coffee growth has been disrupted, with temperatures exceeding 80 degrees, depriving the soil of essential moisture for cultivation.

In response to the supply crunch, companies like Nestle have been compelled to source coffee beans from alternative markets such as Brazil, Indonesia, and India to meet their production needs. Intimex Group, Vietnam’s largest coffee exporter, disclosed the necessity of importing 200,000 tons of coffee beans last year, with the trend continuing into 2024 due to the persisting drought.

Farmers are grappling with the adverse effects of the drought, as water scarcity and infestations by pests like white mealybugs have decimated their coffee plantations. The diminished water levels in lakes, typically used for irrigation, have further exacerbated the agricultural challenges faced by coffee growers in Vietnam. The impending impacts of this coffee crisis may soon be felt directly by consumers in the form of higher latte prices if the situation persists without remedy.

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