Greedy Vietnamese coffee farmers cause supply chain chaos: company chief

By Phan Minh Thong
Fri, March 22, 2024 | 8:11 am GMT+7

Vietnamese coffee exporters are crying foul over intermediaries failing to meet supply commitments as farmers hoard coffee in anticipation of continued price hikes, writes Phan Minh Thong, general director of Phuc Sinh Group, a leading coffee exporter in Vietnam.

 Phan Minh Thong, general director of Phuc Sinh Group. Photo courtesy of the group.

Phan Minh Thong, general director of Phuc Sinh Group. Photo courtesy of the group.

Coffee prices have climbed steadily from VND60,000 ($2.42) per kilogram in November 2023 to VND80,000 ($3.23) per kg at the end of January 2024. To take advantage of this, farmers have reneged on deals signed with wholesale agents who would normally supply coffee to exporters for a fixed price, causing widespread market chaos.

Farmers normally sell around half of their produce ahead of the harvest, but this year they are only allowing a trickle of supplies through to the agents as they wait to renegotiate at higher prices.

Earlier this year, I conducted a survey of coffee plantations and discovered that crops were doing fine, and Vietnam could guarantee more than 28 million bags (1.7 million tons) for export in what could be considered an excellent season.

Phan Minh Thong, general director of Phuc Sinh Group, at a coffee plantation. Photo courtesy of the group.

Phan Minh Thong, general director of Phuc Sinh Group, at a coffee plantation. Photo courtesy of the group.

Coffee prices now stand at VND94,500 ($3.81) per kilogram, and companies have not had time to react. Demand is high, but sales are minimal, leaving agents and exporters looking for tens of thousands of tons to meet their contracts. This has left farmers in the driving seat, and many wholesale agents who paid up front are at risk of going bankrupt.

For exporters and international corporations that have signed export contracts, they still need to find supplies to deliver on their commitments. Domestically, prices are rising daily, and companies causing considerable losses to agents and exporters. The magnitude of the loss is difficult to comprehend.

The market also faces other challenges. When the price of Vietnamese robusta coffee soared dramatically at the beginning of the season, large roasters around the globe refused to buy, and waited for prices to drop. They claimed the price was at a record high, but instead of capitulating, farmers continued to raise prices, forcing the rest of the supply chain into a corner. Wholesale agents are nervous about agreeing new fixed deals with farmers, and even if they do, there remain concerns over whether they will be able to deliver on time.

Everyone is watching each other.

Vietnam now has the world's highest robusta coffee price, surpassing India and forcing buyers to seek new sources. Given these difficulties, many foreign purchasers have raised their new acquisitions this year and are now selling for a large profit. Coffee is extremely difficult to sell at prices above $3.81 per kilogram. Buyers who buy to store will lose a significant amount of money if the price falls.

Adapting to fluctuations

Roasters around the world have developed a coping strategy to adjust to robusta coffee price variations in Vietnam, a major supplier of raw coffee beans to various markets.

Specifically, when the price of Vietnamese coffee exceeds $4,100-4,200 per ton, the price of Brazilian coffee drops to $3,400–3,500 per ton. However, most coffee purchasers worldwide prefer Vietnamese robusta. In the last 14 years, Brazil has increased production to 23 million bags (1.38 million tons) per year. Brazilian Conilon is primarily consumed in Brazil, with only about two million bags exported. However, due to the high prices that make such purchases impossible, many large roasters around the world have partially converted to Brazil, and arabica prices have not increased significantly.

There is no lack of arabica sources, and for the first time in 52 years, robusta will cost more than arabica. As a result, huge roasters worldwide have purchased a portion of the conversion from robusta to low-quality arabica to compensate.

Look at other products

I recall that between 2012 and 2015, the price of Vietnamese black pepper increased from $6,000–7,000 per ton to more than $11,000 per ton, and everyone who grew pepper was ecstatic. However, in 2017, the price fell from $11,000 per ton to $2,500 per ton, shattering all business structures and forcing many enterprises, agencies, pepper growers, and connecting links to fail. I went to the plantations at the time, and there were people who had five to seven tons remaining, but they wanted the price to climb to VND250,000 ($10.1) per kilogram before selling. Nobody expected the price to drop to VND36,000 ($1.45) per kilogram.

Following the price shock, black pepper production decreased because farmers no longer wanted to produce it. Vietnam's output has dropped from 300,000 tons per year in 2015 to 170,000 tons per year, at a price of little more than $3,800 per ton.

Back to the current coffee situation, when prices are high, Vietnamese farmers plant more, as do Brazilian farmers. Therefore, Vietnam must consider this as well. Brazil delivered 68 million bags last year of arabica and robusta, in addition to producing another 50 million bags. Brazil's large area could one day meet the entire world's coffee demand.

People believe that the faster a price rises, the faster it falls. We are dealing with current coffee prices, and they may remain high for a long time. However, we must consider the possibility of price declines, which would be equally painful.

Comments (0)
  • Read More
What makes NobleGo - Vietnam’s first home-bidding livestream platform - so notable?

What makes NobleGo - Vietnam’s first home-bidding livestream platform - so notable?

NobleGo – Vietnam’s pioneering AI-powered livestream real estate bidding platform developed by Sunshine Group – has completed its first 20 livestream sessions.

Real Estate - Tue, September 16, 2025 | 4:53 pm GMT+7

Japanese retailer Aeon to debut another northern Vietnam shopping mall by end-2026

Japanese retailer Aeon to debut another northern Vietnam shopping mall by end-2026

Japanese-backed Aeonmall Vietnam is ramping up construction on its Aeon Mall Ha Long project in Quang Ninh province, home to Ha Long Bay, with an aim to open it to the public by end-2026.

Industries - Tue, September 16, 2025 | 3:54 pm GMT+7

Hanoi terminates Vinaxuki auto plant project, repurposes land for commercial complex

Hanoi terminates Vinaxuki auto plant project, repurposes land for commercial complex

A long-stalled automotive manufacturing project by Xuan Kien Auto JSC (Vinaxuki) has been officially terminated by Hanoi authorities, and the reclaimed land in Phuc Thinh commune will be repurposed for a new commercial and service complex.

Industries - Tue, September 16, 2025 | 2:44 pm GMT+7

Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout

Central Vietnam province reviews investment proposal for thermal power project after Thai EGATi pullout

Authorities in the central province of Quang Tri are evaluating a proposal from Power Generation JSC 1 (EVNGENCO 1), a subsidiary of state utility Vietnam Electricity (EVN), to take over the Quang Tri thermal power plant project, following the withdrawal of Thai investor EGATi.

Energy - Tue, September 16, 2025 | 1:44 pm GMT+7

Amata to sell stakes worth $46 mln in Vietnam units to Novaland-tied buyers

Amata to sell stakes worth $46 mln in Vietnam units to Novaland-tied buyers

Amata VN, the Vietnam arm of Thailand’s leading industrial park developer Amata, has approved a plan for its subsidiary Amata City Long Thanh Urban JSC (ACLT) to sell its remaining 51% stakes in two entities to local developer Novaland-linked buyers.

Real Estate - Tue, September 16, 2025 | 12:19 pm GMT+7

Vietnam already meets FTSE's criteria for stock market status upgrade: Finance Minister

Vietnam already meets FTSE's criteria for stock market status upgrade: Finance Minister

Vietnam has fulfilled the criteria for a stock market status upgrade by FTSE Russell through reforms aimed at facilitating foreign investment inflows into its market, said Minister of Finance Nguyen Van Thang.

Economy - Tue, September 16, 2025 | 9:36 am GMT+7

Banks should be allowed to distribute, invest in mutual fund certificates: Vietnam's finance ministry

Banks should be allowed to distribute, invest in mutual fund certificates: Vietnam's finance ministry

The Ministry of Finance is proposing a key reform that would allow commercial banks to invest in and distribute mutual fund certificates, as part of a broader plan to restructure the investor base and foster the development of Vietnam’s fund management industry.

Finance - Tue, September 16, 2025 | 8:00 am GMT+7

E-commerce boom a major driver of Vietnam's packaging paper industry growth

E-commerce boom a major driver of Vietnam's packaging paper industry growth

Vietnam's paper packaging industry is entering a period of strong growth, with an average annual growth rate forecasted at 10% until 2030.

Companies - Mon, September 15, 2025 | 10:20 pm GMT+7

Vietnam needs support from UK in developing international financial center: Deputy PM

Vietnam needs support from UK in developing international financial center: Deputy PM

Permanent Deputy Prime Minister Nguyen Hoa Binh has called on the UK and the City of London to continue supporting and accompanying Vietnam in promoting and introducing its international financial center (IFC).

Finance - Mon, September 15, 2025 | 10:12 pm GMT+7

Vietnam enforces 8% capital adequacy ratio for banks from Sept 15

Vietnam enforces 8% capital adequacy ratio for banks from Sept 15

Commercial banks and foreign bank branches in Vietnam must maintain a minimum capital adequacy ratio (CAR) of 8%, including at least 4.5% in Tier 1 core capital and 6% in Tier 1 capital, starting from September 15.

Banking - Mon, September 15, 2025 | 10:04 pm GMT+7

Tool for wood traceability management debuts in Vietnam

Tool for wood traceability management debuts in Vietnam

The Vn-WoodID application has been officially launched in Vietnam, becoming a key tool contributing to wood traceability.

Companies - Mon, September 15, 2025 | 10:00 pm GMT+7

Sun Group, US Embassy foster aviation-hospitality cooperation

Sun Group, US Embassy foster aviation-hospitality cooperation

Sun Group, in collaboration with the US Embassy in Vietnam, hosted the US – Vietnam Aviation Partnership Roundtable on September 12, bringing together 15 leading American corporations in aviation, technology, and financial services, opening up opportunities to position Phu Quoc as a new aviation and tourism hub in the region.

Companies - Mon, September 15, 2025 | 9:54 pm GMT+7

Vietnam tops Thai giant SCG’s overseas markets with 9% revenue contribution in H1

Vietnam tops Thai giant SCG’s overseas markets with 9% revenue contribution in H1

Vietnam remained the largest overseas market for Thailand’s Siam Cement Group (SCG) in the first half of 2025, contributing 9% of consolidated sales.

Companies - Mon, September 15, 2025 | 8:10 pm GMT+7

Central Vietnam to have new airport Mang Den

Central Vietnam to have new airport Mang Den

Procedures to adjust Vietnam's airport system planning, including the addition of Mang Den Airport in central Vietnam, are being proceeded, according to the Ministry of Construction.

Infrastructure - Mon, September 15, 2025 | 5:16 pm GMT+7

Vietnam's government seeks to position country as 'regulated hub for digital assets in Asia': Dragon Capital

Vietnam's government seeks to position country as 'regulated hub for digital assets in Asia': Dragon Capital

The Vietnamese Government has advanced the regulation of digital assets, with a resolution launching a five-year pilot framework for issuance and trading. This framework signals the Government’s intent to position the country as a regulated hub for digital assets in Asia, which could attract new capital inflows, write Dragon Capital analysts.

Economy - Mon, September 15, 2025 | 2:20 pm GMT+7

Agribank introduces sizable $4.17 bln preferential credit package

Agribank introduces sizable $4.17 bln preferential credit package

Right from the beginning of 2025, Agribank launched a substantial preferential credit package worth VND110 trillion ($4.17 billion) to support individual customers.

Companies - Mon, September 15, 2025 | 1:32 pm GMT+7