Supply Shortage Drives Record Prices, with Climate Change and Hoarding Exacerbating the Crisis

Coffee prices in Vietnam are projected to remain elevated as hoarding by farmers and middlemen, combined with adverse weather conditions, continue to exacerbate the country’s coffee supply shortage. As the world’s largest producer of robusta beans, Vietnam’s current supply crunch is having ripple effects on the global coffee market, pushing prices to an all-time high.

Local prices in Vietnam have surged this year, driven by farmers holding onto their beans in anticipation of higher prices, following a weak harvest in 2023-2024. This has made it increasingly difficult for exporters to secure beans, leading to a record number of contract defaults. At present, robusta bean prices are hovering around 130,000 dong (S$7.60) per kilogram, with expectations that they could rise to as much as 150,000 dong (S$8) in the near future.

The supply crisis is being compounded by the effects of climate change, with increasingly erratic weather patterns and drier conditions further straining yields. Vietnam is expected to face its fourth consecutive year of a global coffee deficit, a situation that is expected to keep robusta prices volatile for the foreseeable future.

Despite these price hikes, the impact on coffee drinkers at the retail level has been somewhat cushioned, thanks to smaller price increases in arabica coffee. However, as Vietnam’s shortfall continues, global coffee futures have seen a sharp increase, with prices rising by 50% this year, reaching their highest levels in 16 years. The ongoing hot and dry weather in Vietnam is raising concerns about the next harvest, with fears that the supply situation could worsen further.