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23 Nov 2022

Econ Digest

Coffee prices soar to 10-year high…leading to significant increase in Thailand’s coffee imports in 2022


        Coffee prices in the global market have been rising since the end of 2021. Brazil and Vietnam – the world’s major coffee suppliers  have faced severe climate change, which has caused a reduction in their coffee bean production. Particularly, the coffee output of Brazil the world’s largest Arabica producer is expected to drop approximately 11% YoY this year, and its coffee stocks may drop to the lowest level in 23 years, while Vietnam the world’s largest Robusta producer was also hit by severe flooding from tropical storms, causing the coffee output and stocks to decrease by more than half. This supply shock has caused global coffee prices to soar during the first 9 months of 2022, the average price of Arabica rose by 42.3% YoY while the average price of Robusta rose 27.3% YoY, marking the highest level in 11 years.

        Thailand relies heavily on the import of coffee beans due to insufficient production to meet domestic demand as Thailand can only produce 25% of its total consumption demand. During the first 9 months of 2022, Thailand’s imports of coffee rose by 10.3%YoY and faced a 30.6%YoY increase in the imported prices of coffee. KResearch projects that Thai coffee imports in 2022 will reach USD163 million, growing 27%YoY, and projects that global coffee output will stay at a low level for another three years until a new round of Brazil’s coffee output enters the market in 2025, which will drive global coffee prices to persist at high levels. Consequently, coffee producers and coffee shop operators will need to bear the high cost of coffee beans. This expense – along with other costs – could be passed on to consumers who may have to pay a higher price for each cup of coffee. Meanwhile, coffee farmers will benefit from good selling prices of coffee in the last quarter of 2022 and the first quarter of 2023, due to limited global coffee output. Looking ahead, Thai coffee producers should upgrade their production to higher quality coffee to cushion the impact of global market price volatility. Nonetheless, the export opportunities of Thai coffee are limited and considered challenging in terms of competition due to the high production costs and low yield per rai, especially when compared to Vietnam.

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