Covid lockdown in Vietnam could keep coffee prices high through 2022
Pots of coffee bean are seen at a coffee shop in Hanoi, Vietnam on August 15, 2012. Vietnam is a major coffee producer and exporter.
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Vietnam’s Covid-19 lockdown has constrained the global supply of coffee — and coffee prices could remain “relatively high” through 2022, said Fitch Solutions.
It is also the second largest exporter of coffee in the world. It is currently fighting the worst Covid pandemic since its outbreak. The lockdown in Ho Chi Minh City at the export hub has impacted overseas coffee and other products shipments.
According to Reuters, Vietnamese coffee exports dropped 8.7% in August from July, when they were at 111,697 tons. This was citing customs data. Between January and August, Vietnam exported 1.1 million tonnes of coffee — 6.4% lower than a year ago, but coffee export revenue rose 2% to around $2 billion, said the news agency.
Global coffee prices have been pushed up by the fall in Vietnam’s imports and slumps at top-producing countries. Benchmark arabica coffee futures have jumped by around 45.8% this year, while robusta futures have surged 52.2%, according to Refinitiv data.
Brazil, the world’s largest coffee producer, experienced waves of frost and drought that damaged its crops. Bad weather also affected Colombia’s harvest, and the emergence of the “mu” coronavirus variant in the country could lead to prolonged restrictions and labor shortages that worsen production, Fitch Solutions said in a report last week.
The consultancy said that they believe demand will increase in Europe and America in the coming months, as Covid-19 restrictions are lifted. This should make it possible for shops to reopen.
It raised the 2021 average price for arabica coffee to $1.60 per kilogram. It raised its projected price for 2022 to $1.50 a pound from $1.25 a pound.
Vietnam — which shares a border with China — reported only 1,465 Covid cases and 35 deaths last year, according to data compiled by Johns Hopkins University. The data revealed that the cumulative number of cases in the country has risen to over 635,000, and there have been more than 15,900 deaths.
Like many of its Southeast Asian neighbors, Vietnam is struggling to contain the highly infectious Covid delta variant. According to official statistics from Our World in Data, only 5.7% of Vietnam’s population have been fully vaccinated.
Authorities on Monday announced a two-week extension of restrictions in Ho Chi Minh City, Vietnam’s business hub and Covid outbreak epicenter, Reuters reported.
Vietnam plays an important role in the global manufacturing supply chain. Movement curbs and factory closures to fight Covid have hit the country’s manufacturing production and exports — affecting global supplies of goods from coffee to clothing and semiconductors.
Covid restrictions could soon be progressively lifted, so disruptions to Vietnam’s coffee exports are likely short-lived, said Fitch Solutions.
The consultancy said Brazil’s coffee supply should rebound “fairly rapidly” if adverse weather does not return.
Fitch Solutions projects that global coffee supplies could begin to recover in the 2022/2023 seasons. The average annual price of arabica will drop to $1.20 per kilogram in 2023.
Fitch Solutions stated that ongoing government support programs will help support the production of many important Latin American and Asian producers like Colombia and Vietnam.
“In the meantime, the consumption of many key consumers like Japan and EU-27 seems to have reached its highest point.”