Why Vietnam drought may spike global espresso prices

Domestic forecasts for next season's harvest in Vietnam remain grim, with the nation's Mercantile Exchange expecting a 10-16% fall in output due to the extreme heat.
Coffee cherries are pictured at Tran Thi Huong's farm in Pleiku, Gia Lai province, Vietnam, June 12, 2024.
Coffee cherries are pictured at Tran Thi Huong's farm in Pleiku, Gia Lai province, Vietnam, June 12, 2024.

GIA LAI PROVINCE — Vietnam’s coffee growers have been hit hard by the worst drought in nearly a decade this year, and that could mean a morning espresso is about to get more costly.

The country is the world's second biggest coffee producer and the top producer of robusta beans, the variety most commonly found in espressos and instant coffees.

Domestic forecasts for next season's harvest in Vietnam remain grim, with the nation's Mercantile Exchange expecting a 10-16% fall in output due to the extreme heat.

Doan Van Thang is a 39-year-old coffee farmer from the central Gia Lai province.

“The drought dried up this whole area and the surrounding areas, and the water shortage is so severe that compared to last year, the harvest of coffee cherries is very low. We lost a lot of the output. It’s very small, very low this year.”

With the price of coffee beans hitting a record high, farmers are enjoying the extra cash.

They are also trying out new tactics to protect trees in the heatwave, like letting them grow for longer, allowing their roots to access deeper water reserves.

Growers also soften the soil around plants, or cover it with leaves to improve absorption of rainwater and fertilizers.

And a return of rainfall in recent weeks has improved the outlook, boosting confidence among farmers and officials.

But it remains unclear whether the improved weather conditions and new farming practices will help boost output and drive down prices of robusta beans.

“We farmers should be happy when the price increases, but due to this drought, we are not very happy because the price increases but the output decreases. So in general, we're happy and we're sad at the same time because the climate changes erratically, and we can't grasp those changes, so we are more sad than happy because the output has decreased much more compared to previous years.”

The United States Department of Agriculture has been far less pessimistic than domestic projections - estimating Vietnam's next harvest to be roughly steady.

Whatever the impact on the harvest, coffee costs for drinkers around the world are likely to rise.

While record wholesale prices have so far had a limited impact on consumer prices, there are signs that might be changing.

Recent data from Eurostat showed coffee inflation up by 1.6% in the European Union in April and 2.5% in robusta-loving Italy.

That's still well below price rises from a year earlier, but it was higher than 1% in the March EU reading - a sign roasters may have started to pass their higher costs on to consumers.

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