Some Vietnam Coffee Farms Flourish Amid Drought, Yet Espresso Prices May Still Rise – Reuters

Coffee Crisis in Vietnam: Drought Raises Global Price Concerns

By Phuong Nguyen and Francesco Guarascio

PLEIKU, Vietnam – This year, Vietnamese coffee farmers are facing significant challenges due to the worst drought in nearly a decade, raising fears of increased espresso prices worldwide. However, some farmers have adopted innovative strategies to maintain healthy yields despite the harsh conditions.

Domestic predictions for the upcoming harvest season in Vietnam, the second-largest coffee producer globally, remain bleak. The Mercantile Exchange of Vietnam (MXV) projects a decline in output of 10-16% due to extreme heat that impacted the Central Highlands coffee region from March to early May, as noted by deputy head Nguyen Ngoc Quynh.

Fortunately, recent rainfall has provided a glimmer of hope, enhancing morale among farmers and officials. Nonetheless, it is uncertain whether this improved weather will substantially increase output or lower prices for robusta beans, the type most frequently used in espressos and instant coffees, which Vietnam produces in abundance.

"I expect the country’s output to fall by 10-15%, but my farm will increase production," said Nguyen Huu Long, who operates a 50-hectare plantation in Gia Lai, one of Vietnam’s leading coffee-producing provinces. To shield his trees from the heat, he kept the soil moist by covering it with leaves. Unlike the common practice of cutting trees after a few years to improve soil fertility, he preserves his trees for decades, allowing them to develop deeper roots and better access to underground water reserves.

Farmers on his plantation have also been softening the soil around the plants to enhance water and fertilizer absorption, explained Doan Van Thang, 39.

In another plantation located 20 km from Pleiku, tenant farmer Tran Thi Huong utilized additional water to maintain her plants’ health during the drought. Thanks to ample reserves from local irrigation canals, she was able to keep her crops adequately watered. While the coffee cherries have turned out smaller than previous years, she believes overall production will remain stable. Timely use of biopesticides also helped manage a surge in pests resulting from the extreme weather.

This perspective aligns with forecasts from the United States Department of Agriculture (USDA), which suggests that Vietnam’s upcoming harvest will be similar to the current season’s output, presenting a less grim outlook than local assessments.

Impact on Coffee Prices

Despite uncertainty surrounding the harvest, global coffee prices are likely to rise. Wholesale prices in Vietnam and London-traded robusta futures reached record highs earlier this year, primarily due to a disappointing harvest in Vietnam and concerns over the forthcoming harvest affected by the drought.

Although high wholesale prices have not yet significantly influenced consumer prices—coffee inflation was only 1.6% in the European Union in April and 2.5% in Italy—there are signs that roasters may be beginning to pass on their higher costs to consumers, as indicated by an increase from the 1% noted in March.

Concerns about Vietnam’s coffee production persist. Traders warn that insufficient rainfall post-drought or excessive rainfall before the upcoming October harvest could further impact yields.

Moreover, increased global demand for robusta coffee and improved bargaining power for farmers mean high wholesale prices could persist. Many farmers have also shifted to growing durian, a tropical fruit currently in high demand in China, further complicating the coffee supply landscape.

"They have the financial capability to hold onto their products, so they won’t be in a rush to sell," remarked Le Thanh Son from Simexco, one of Vietnam’s largest coffee exporters.