In about a month, at the end of October 2024, the coffee harvest season will begin. This is also when CWDC Vietnam will start collecting coffee wood to produce coffee wood dog chews. After a harvest season, old coffee trees, typically over 20 years old and yielding low productivity, are cut down and replaced with young trees. In previous years, these old trees were purchased by CWDC Vietnam to produce coffee wood dog chews.
But does this still hold true with coffee prices now reaching record highs?
Let’s look at the reasons behind these record-high coffee prices. Experts say that the increase in Vietnam’s coffee export prices is due to a global shortage in supply. Major markets such as Europe, the U.S., Japan, Israel, and China have ramped up their coffee purchases, leading to a 30% price increase compared to 2023. For example, in early July 2024, Hungary purchased coffee from Vietnam at an average price of over $6,800 per ton, while Israel bought it at $6,100 per ton.
Notably, Robusta coffee prices have seen significant growth recently. In the past, Robusta prices fluctuated around $4,000 per ton. However, by the close of trading on September 4th, as per the Vietnam Commodity Exchange, Robusta prices surged by 4.3% (or $200 per ton), nearing the critical $5,000 per ton mark, while Arabica coffee prices increased slightly by 0.4%. The weather conditions in Brazil continue to be a focus, as the country’s main coffee-growing regions are facing the worst drought since 1981.
Weather forecasts indicate that the lack of rain in Southeast Brazil’s coffee farms could extend into September. This raises further concerns about the supply outlook for the 2025-2026 season, especially since this is expected to be an off-year in Brazil’s biennial coffee yield cycle.
Although there are no concrete statistics yet on the damage caused by drought in Brazil’s coffee farms, analysts predict a potential 20% drop in production.
Robusta prices increased more sharply in yesterday’s session, driven by supply concerns not only in Brazil but also in Vietnam, the world’s largest Robusta producer. The Central Highlands, Vietnam’s coffee-growing hub, has also experienced extreme heat for more than two months, with production expected to drop by 15-20% compared to the previous season. Additionally, domestic supplies have already dwindled, further intensifying fears of a global supply shortage, which supports higher prices.
Global Robusta prices are forecasted to continue rising sharply and steadily, due to concerns over a scarcity of supply from Vietnam. The supply shortage from key growing regions will likely keep coffee prices high until mid-2025.
By the end of October 2024, when Vietnam begins its new harvest, the increased supply could have some effect on market prices. However, industry experts predict that export prices will not significantly decrease, even as supply increases in the short term.
The rise in coffee prices will likely lead to a tendency to retain old coffee trees for continued fruit production, instead of cutting them down to plant new trees, as was the practice in previous years. This will impact the availability of raw materials for the coffee wood dog chew industry, making resources scarcer. Companies with strong material sourcing networks, like CWDC Vietnam, will have the advantage in leading this market.
We project that the cost of raw materials for producing coffee wood dog chews will rise in the coming years, in line with coffee prices. Companies with strong financial resources and extensive sourcing networks will dominate this industry, as the raw material collection period only lasts for a few months. Once next March passes, it becomes impossible to gather materials. Therefore, the upcoming season promises to be unpredictable, with fierce competition among the leading coffee wood dog chew manufacturers.
