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Concern grows for global coffee supply amid Vietnam lockdown

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Traders are struggling to get beans to ports for export after Covid curbs were imposed on Ho Chi Minh City.

Concerns are growing over global coffee supplies amid tough coronavirus travel restrictions imposed in Vietnam to tackle the spread of the aggressive Delta variant of Covid-19.

Supply chains are been disrupted after Vietnam, the world’s second-biggest exporter of coffee, tightened lockdown measures in the port of Ho Chi Minh City, as well as bringing in restrictions in some coffee-growing areas of the Central Highlands.

The Vietnam Coffee-Cocoa Association has urged the government to ease restrictions after traders were reportedly struggling to transport beans to ports for export amid the restrictions.

Vietnam managed to contain the spread of the virus last year through lockdowns and rigorous contact tracing, allowing its economy to grow at one of the highest rates globally during 2020.

But the south-east Asian country, which is lacking vaccines, has struggled to control the more contagious Delta variant. On Monday, 14,219 new cases were announced, the second highest daily increase since the start of the pandemic. Vietnam’s total caseload has risen to 445,292, up from fewer than 1,500 infections during all of 2020.

Restrictions were introduced in Ho Chi Minh City, the centre of the outbreak, in June, but were tightened further in August. Exporters told Bloomberg they were struggling to transport goods, and that the problem was compounded by a shortage of containers and rocketing shopping costs.

The latest outbreak has caused misery for the millions of people now under lockdown, and disrupted supply chains in the country, which is a significant manufacturing industry hub. Factories producing goods for global brands – including Samsung, Nike and Adidas – have also been affected.

Responding to calls from the Vietnam Coffee-Cocoa Association, the transport minister, Nguyen Van The, told officials in the south to reduce unnecessary administrative hurdles to ensure the smooth transport of agricultural goods, such as coffee and rice.

The recent Covid-19 outbreak in Vietnam, which provided more than 20% of the EU’s coffee imports in 2019, is contributing to what analysts describe as a perfect storm in the global coffee market.

Brazil, the world’s biggest coffee producer, has had unseasonable weather that has damaged crops and led to a rise in the cost of beans.

Ibi Idoniboye, a senior market analyst for Mintec, said: “At the start of the flowering season in Brazil for this year – for the 2021-22 crop, which is currently harvesting – there was a lot of drought, so the trees were under a lot of stress and weren’t able to produce efficiently. So you’re already seeing lower production.” The 2022-23 crops, which will be harvested next year, has been hit by frost.

Vietnam is a big producer of robusta, a hardier bean with a more bitter taste that is used mostly to make instant coffee, espresso or as a filler in some blends. Brazil’s bean exports are primarily the premium arabica, with some robusta.

The price of arabica and robusta has risen to multiyear highs, said Idoniboye. But it is unlikely that consumers will notice any immediate increase in the cost of a cup of coffee since most suppliers have contracts that are locked in for six months. “The next few months are going to be the most important,” he said.

There would be a clearer picture once the result of Brazil’s harvest was known, and once there was more certainty regarding Vietnam’s Covid outbreak, Idoniboye added.

By Rebecca Ratcliffe – The guardian – September 1st, 2021

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