Recent articles have highlighted that Vietnam’s coffee market has recently slowed and that prices have fallen for robusta beans, with buyers looking to Indonesia. All the news coverage seems to suggest that this is because of weather conditions, which are subject to constant change -- is it because it's raining too much? Because it's not raining enough? Because it's raining early? Because it's raining too late? All this makes for a very unstable market, and here's why.
Vietnam Overwhelmingly Grows Robusta Beans
Vietnam is currently the world’s largest robusta producer, and robusta prices have dropped after reaching 46,000 dong per kg (about $2), the highest level since September 2011.
Because of the low prices, Vietnamese farmers were still holding back stocks, refusing to sell due to the low domestic prices. In addition, weather conditions have worsened the problem. While the dry weather has been at peak in the Central Highlands, unseasonable showers were reported in the region in the past two weeks, weather reports and traders said.
Are Arabica Beans the Answer?
Although not great news, for the Vietnamese coffee growers, here is an opportunity to think about the kind of beans Vietnam should focus on in the long run. Robusta beans differ from the Arabica beans, which American are more used to drinking. The differences, according to experts, are the following:
Arabica plants are more sensitive to temperature, handling, and pests -- they are what's mainly used in branded gourmet coffee. Robusta are hardier plants, tolerating lower elevations and less favorable climate and soil conditions. Robust are grown primarily in Southeast Asia and Africa. They are more of a commodity and used in instant coffee. They also have about twice as much caffeine as Arabica beans. If Vietnam is to break into the U.S. coffee market, it may make sense to explore, as is currently being done, how to grow Arabica and diversify.
Like other commodities such as corn, eggs, or meat, if Vietnam is to pull itself out of the commodities market -- that is, if Vietnam coffee growers are to compete on things other than price, they will need to think of growing Arabica beans or at least distinguishing their product based on brand, carbon neutrality, or other factors. That is currently not happening, but with the recent news, it is definitely a goal to be pursued.
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