Big news from the coffee world! Robusta coffee prices hit a record high on Tuesday, July 9, amid tightening global markets and slow shipments from Vietnam, the leading producer.
According to Reuters, robusta coffee prices have surged 63% this year, peaking at $4,667 per ton on the ICE Futures Europe market in London. This increase isn't new; over the past 18 months, the coffee market has been rising as global producers like Vietnam struggle to keep up with growing demand. In 2023 alone, robusta prices climbed 58%.
The rising demand for robusta is due to coffee roasters switching from the more expensive arabica beans to the cheaper robusta. Typically used for instant coffee, robusta is now increasingly blended into roasted coffee mixes traditionally dominated by arabica.
However, Vietnam's coffee exports have taken a hit. In June, exports were only 70,202 tons, bringing the total for the first half of the year to 893,820 tons, down 11.4% from the previous year. This reflects tight internal market conditions in Vietnam, the largest robusta producer.
Over the first two decades of this century, Vietnam’s coffee production nearly tripled, peaking at 31.58 million 60-kg bags in the 2021/22 season. However, recent seasons have seen smaller harvests, with the latest estimated at 29 million bags. Further declines are widely expected for the upcoming 2024/25 season.
Vietnamese coffee farmers have been hit by the worst drought in nearly a decade, worsening prospects for the next harvest starting around November. Despite rising prices, global coffee demand continues to grow. The International Coffee Organization forecasts a 2.2% increase in global coffee consumption for the 2023/24 season.
Many independent estimates predict continued coffee demand growth in 2024/25, albeit at a slightly slower rate of 1.25%. This growth is driven by new coffee consumer markets and producer countries like China, India, Indonesia, the Middle East, and Vietnam itself.
Challenges faced by Vietnam's robusta producers have created opportunities for Brazil, which primarily grows arabica but has expanded robusta production. "Brazil is now planting a lot of robusta and may soon become the most important country for robusta production, surpassing Vietnam," said Giuseppe Lavazza, chairman of the Lavazza coffee company.
Brazil produced about 21.5 million bags of robusta last year, nearly a record, and is currently harvesting what most analysts expect to be an even larger crop, despite some early complaints from farmers. "With prices like these, Brazilian farmers are working hard to produce more robusta," Lavazza added.
So, coffee lovers, is it time to try robusta blends or stick with your arabica favorites? One thing is certain: the coffee world is dynamic and always full of exciting developments!
