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Explain the reasons for the sharp increase in coffee prices

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What reasons have caused the sharp increase in coffee prices? Recently, we have witnessed the spectacle of coffee prices escalating, consistently surpassing one peak after another and setting unbelievable records for over a decade. Despite the international coffee prices fluctuating weekly on both exchanges, domestic coffee prices have remained steadily increasing, even reaching unprecedented levels. What is the reason for this?

 

Coffee prices and the sharp increase

 

After causing many helpless farmers to replace coffee with other crops to improve their income, coffee prices have suddenly made a U-turn, experiencing strong and sustained growth despite the erratic fluctuations in international coffee prices. Domestic coffee prices have reached remarkable milestones, with specific figures indicating that on March 12, coffee prices in the Central Highlands provinces were recorded at 90,500 – 91,500 VND/kg. The price has been maintained above 90,000 VND/kg for over a week. Consequently, coffee prices have doubled compared to the previous year, witnessing a 50% increase compared to the end of 2023.

In contrast to the domestic Robusta’s upward momentum, on the London market recently, Robusta coffee prices have lost their upward trend. The Robusta coffee price on the London futures market for May delivery is also at $3,297/ton, lower than the price on March 8 by $84/ton

Explain the reasons for the sharp increase in coffee prices

Domestic coffee prices have been continuously rising for several weeks

 

Explain the reasons for the sharp increase in coffee prices

 

According to Mr. Nguyen Nam Hai, Chairman of the Vietnam Coffee-Cocoa Association (Vicofa), there are three reasons behind the rapid and substantial increase in coffee prices.

Firstly, the climate has affected production. The El Nino phenomenon has caused droughts in coffee-growing regions worldwide. While the previous crop was not significantly affected, buyers are concerned about upcoming coffee crops. In Vietnam, during the 2023-2024 season (from October of the previous year to September of the following year), the production shortfall was approximately 10%.

Secondly, the high transportation costs due to military conflicts have contributed to the price surge. Worldwide military conflicts, particularly tension in the Red Sea, have led to increased transportation fees and other costs, pushing coffee prices higher.

Thirdly, many global financial speculators, after oil and gold, have chosen coffee as an investment, contributing to the rapid increase in coffee prices.

Domestic coffee prices are taking unpredictable steps. Typically, a decrease in international coffee prices over a few sessions affects domestic prices. However, when international coffee prices are low, domestic prices remain stable at a high level. No coffee expert can predict whether domestic coffee prices could reach 92,000 VND/kg as of now.

In summary, the News has provided readers with three reasons, as assessed by experts, that are driving the rapid and significant increase in Vietnamese coffee prices to unprecedented highs in the past decade. However, it is relatively certain that Vietnamese coffee prices will continue to rise.

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