Global coffee supply dealt a fresh blow by major producer Vietnam

Vietnam is the biggest robusta coffee grower and its exports were declining because of depleted farmer stocks, the worsening Covid-19 outbreak and a severe container shortage. 

World coffee supplies are suffering a fresh setback from stringent travel curbs imposed in second-biggest grower Vietnam to control the worsening spread of the infectious Delta variant of the coronavirus.

The government is keeping the city of Ho Chi Minh, the exporting hub, under lockdown because of a surge in virus infections, and has tight movement controls in place in some key producing areas of the Central Highlands.

Exporters are struggling to transport beans to the ports for shipment, according to traders and suppliers. That’s adding to a raft of other logistical problems such as a dire shortage of containers and soaring freight rates.

Trade groups, including the Vietnam Coffee-Cocoa Association, have petitioned the government to ease the curbs, which they say cause delays, raise costs and put shippers at risk of having to compensate buyers for late delivery.

In response, Transport Minister Nguyen Van this week ordered authorities in the south of the country to do everything possible to facilitate the transport of farm products, such as coffee and rice. 

He told local governments they must avoid all unnecessary requirements and burdensome paperwork.

Global coffee prices have been on a tear amid mounting threats to supplies from South America to Asia. 

Drought- and frost-ravaged crops this year in top grower Brazil, which produces the premium arabica variety, are adding to the widespread logistics issues in Vietnam and Indonesia.

While some roasters decided to switch to cheaper supplies of robusta beans from Vietnam after the frost destroyed production in Brazil, soaring prices and shipment woes now make that option far less appealing.

Vietnam is the biggest robusta coffee grower and its exports were declining because of depleted farmer stocks, the worsening Covid-19 outbreak and a severe container shortage. 

Exports are likely to continue dropping through September, top shippers Intimex and Simexco Daklak warned last month.

Speaking last month, Do Ha Nam, chairman of Intimex, said: “We have bought no beans and sold no beans for more than a month.” 

Prices of the milder tasting arabica variety traded in New York rocketed to the highest since 2014 last month after frigid weather destroyed trees in Brazil. That helped lift London prices of the more bitter robusta to the strongest since 2017. 

“Surging shipping costs have discouraged importers from purchasing beans in Vietnam. We have no new contracts to buy beans from farmers,” said Phan Hung Anh, chief executive of Quang Minh Coffee Trading in the southern province of Binh Duong, last month. 

Sending a container from Vietnam to Europe costs as much as $10,000, six to seven times more than a year ago. 

The country’s exporters haven’t been able to gain much from the jump in the market because stockpiles in their Ho Chi Minh City-area warehouses have been priced already. 

Shippers are worried that the logistics pain may persist through the end of this year when the new harvest rolls in and exports normally rise. An explosive new surge in coronavirus cases is another concern.

Growers were already worried that Covid infections may increase. 

Harvesting may slow if the virus stays around until the harvest peaks in November, said Simexco’s Hung last month.

Exports through July this year are running 9% below a year earlier, according to the statistics office.

Bloomberg