Coffee industry to face more losses in Q2

Vietnam's coffee industry will probably suffer more losses in the second quarter due to the COVID-19 pandemic, Phan Xuan Thang, Vice Chairman of the Vietnam Cocoa and Coffee Association, has said.

The COVID-19 outbreak has forced many countries to announce social distancing or lockdowns, so a series of restaurants and coffee shops must close, leading to strong reduction in coffee demand.

At present, the restaurants and coffee shops are channels with the largest consumption of coffee.

Due to the lower demand, the coffee processors have mainly used their inventories, according to Thang. Therefore, local enterprises have signed few coffee export contracts. That has had a great impact on domestic coffee production and export activities in the second quarter.

The Vietnam National Coffee Corporation (Vinacafe), one of large coffee processors and exporters in Vietnam, has had a lot of difficulties in offering its products to partners. The global consumption of coffee is only about 20 per cent compared to the volume before the pandemic.

"The association has expected big sport and cultural events like the 2020 Summer Olympics to increase demand for beverages, especially coffee. However, those events have been postponed,” Thang said.

In addition, although the demand for consumer goods has increased due to the strong spread of COVID-19, coffee is not considered an essential product.
There would be strong fluctuations in coffee prices in the second quarter because of lower consumption in the context of the pandemic, he said.

The association said Vietnam’s coffee exports did not suffer impacts from the pandemic in the first quarter because the local coffee enterprises completed their export contracts signed last year, according to vietnambiz.vn.

However, the export value in the quarter was not high because of a low export price, so most of the enterprises suffered losses to maintain their reputation with their partners, Thang said.

According to the Ministry of Agriculture and Rural Development, in the first quarter of this year, Vietnam exported 474,000 tonnes of coffee, earning 801 million USD. Those figures declined by 3 percent in volume and 5.6 percent in value year on year. Of which, the coffee exports in March reached 154,000 tonnes worth 261 million USD.

Especially, the ministry reported that the coffee export value to the UK in the first quarter decreased by half compared to the same period of last year to 13.5 million USD.

The Government should have support for the industry to solve difficulties due to the pandemic, Thang said.

He also hoped that the demand for coffee would increase next year because the global sport and cultural events would open again after the pandemic ends. That would be a big opportunity for the domestic coffee industry to resume exports in 2021.

Besides that, in the current situation of drought and lower prices, farmers in many countries had changed to grow other trees, leading to lower supply next year.

That will be one of the factors to increase the coffee price next year, according to the ministry.