- Posted by ROASTeCoffeeBuzz
- Mon, 11/08/2010 - 11:27
Vietnam: Stockpiling of Coffee
The Vietnamese government has decided on annually stockpiling thousands of tons of coffee beans to better control the price of their coffee. This year the country’s coffee industry plans to hold back 500,000 tons for six months. Exporters are recommending that the coffee stockpiling begin in December following the peak of the harvest, because the supply coming into the market would be large enough to lower prices. By withholding the large amount of coffee, the prices will remain higher.
However, since trade in Vietnamese coffee has slowed in the last month, the additional beans coming online from the harvest would add to the pressure to lower prices drastically.
Vietnam is the world’s second-largest coffee producer after Brazil. It’s a matter of comparing Robusta to Arabica though; Vietnam’s Robusta is used for instant coffee, so there are two different markets involved. In any case, being the number one producer of Robusta does mean that what Vietnam does affects instant coffee prices worldwide.
Other factors affecting the country’s output were a drought in some coffee-growing regions and smaller bean sizes. Also a third of the trees are nearing the end of their 25-year production lifespan. Prices are additionally affected by forecasts of the different organizations: the growers, the exporters and the government. This is complicated by the changes in the world coffee industry and the interplay of supply and demand created by the growth of new countries to the coffee producing arena and the growth of multinational coffee roasters.
It still appears too soon to be sure, but the word is out that we will probably see a rise in coffee prices because of the many variables of supply and demand and the factors influencing them. Stockpiling of coffee is only one of these factors; it will be interesting to see if the Vietnamese growers will have an effect or not.
samuellaw178 | Sun, 11/13/2011 - 17:38
Instant coffee is already bad on its own because the coffees were over-extracted in the manufacturing process. Plus it's made from Robusta, which I never knew until now, that further made it more unpalatable. I will never go back to instant coffee. :P
jbviau | Sun, 11/13/2011 - 16:37
...would you shed a tear? Not likely!
intrepid510 | Fri, 11/04/2011 - 15:14
Not really a big deal for people that like coffee on Roaste, but it's interesting to see how coffee hoarding works and if it is just like was said by another in the comments that it is mainly just they have a set price and if it can sell they sell, not they are changing the prices.
Heirloom Coffee LLC | Thu, 11/11/2010 - 10:11
We import directly from Vietnam and over the last two years they have seen some drop in pricing initially, but not a lot. Many things affect the pricing... for instance, in 2009 Brazil quietly bought up all available production that wasn't committed for sale already, because of the shortages in Brazil. Much of the Brazilian coffee sold last year was actually Vietnamese. So up until the last harvest there was actually a shortage, but because world prices dropped, they were unable to make a price increase to exploit the short supply and high demand.
As the recession hit hard last year and there was better supply, demand fell, so they kept prices steady. We saw our first price increases in a year just in the last two months, about 12% overall. But then, energy prices went up that much and energy costs directly affect coffee production due to all the transport and equipment. So many factors affect pricing... but in the end, Vietnam is a country that needs to sell their coffee to make a living for their people, and it's likely they will meet all requests for sales and sell whatever there is a market for. They may be hoping for some psychological effect from published info about hoarding. But the only actual "hoarding" could probably be more aptly labeled as "coffee we weren't able to sell at the desired price".