| Under pressure from Brazil's new crop, Arabica coffee prices weaken. Coffee export prices slightly decrease, inventory continues to recover, causing Arabica prices to fluctuate. |
At the end of the weekend trading session, the price of Robusta coffee in London for May 2024 delivery decreased by 22 USD/ton, at 3,744 USD/ton, and for July 2024 delivery decreased by 19 USD/ton, at 3,679 USD/ton.
Arabica coffee prices for May 2024 delivery increased by 5.75 cents/lb, to 212.5 cents/lb, and for July 2024 delivery increased by 5.2 cents/lb, to 211 cents/lb.
The market continued to be mixed, with Arabica coffee rising to its highest level in more than 6 months. New York rose for 2 consecutive sessions but could not pull London. Robusta fell due to profit-taking activities after coffee inventories on the floor increased to a 2.5 month high of 3,094 lots.
Concerns that excessive drought in Vietnam will continue to limit Robusta coffee production in the new crop, while existing supply shortages that are difficult to compensate from other sources, remain factors driving Robusta coffee prices and supporting the upward momentum of Arabica coffee prices.
According to CEPEA, the Conillon robusta crop has begun to be harvested in some areas, while domestic prices in Brazil have surpassed the 1,000 Real mark for a 60-kg bag for the first time. Indian coffee prices are also moving in sync with global Robusta prices, which are witnessing a sharp upward trend due to supply disruptions from leading producer Vietnam. India’s exports in the fiscal year ending March 2024 hit a record high in value, surpassing $1.26 billion thanks to high Robusta prices.
According to the Vietnam Coffee and Cocoa Association (Vicofa), the impact of climate change and the El Nino phenomenon causing drought across coffee growing regions around the world has led to a decline in output. In Vietnam alone, output will fall by 10% in the 2023-2024 crop season, as people switch to other crops that bring higher value. Meanwhile, inventory in businesses is at a record low, and low supply is pushing prices up. Therefore, export volume from now until the end of the season will decrease.
In addition, geopolitical conflicts and tensions in the Red Sea region have increased shipping costs and many other costs. Coffee prices have also increased due to speculative activities from many financial investors.
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| Coffee is the second highest export commodity in the agricultural sector. |
In the first quarter of 2024, Vietnam exported nearly 600,000 tons of coffee with a turnover of about 1.9 billion USD, an increase of only over 3% in quantity but an increase of over 54% in export turnover.
According to the Ministry of Agriculture and Rural Development , coffee is the second highest export commodity in the agricultural sector, behind only wood products and surpassing even seafood.
Vietnam's leading coffee export markets in recent times are still the EU, Japan, the US, Russia... Of which, the EU continues to be Vietnam's largest coffee export market.
According to experts, the excessive drought in the Central Highlands will continue to negatively impact the prospects of Robusta coffee production. This is also the driving force behind the recent increase in Robusta coffee prices both domestically and internationally.
Notably, the Robusta supply situation from India is also assessed to be poor due to drought. Coffee traders in Bangalore (India) said that farmers are limiting sales in anticipation of further price increases, making it difficult for exporters to fulfill signed contracts.
India's coffee exports in the fiscal year ending March 2024 hit a record high of over $1.26 billion, largely due to unprecedented high prices of Robusta coffee.
Analysts say the simultaneous supply shortage in India and Vietnam will make it difficult for world coffee prices to "cool down" soon.
Forecasting coffee prices in the coming time, Citi Group said that the record price increase of coffee still has room to set new record high prices in the context of unfavorable weather and increasing demand.
In the commodity market, Citi Group analyzed that coffee prices have surpassed short-term resistance and are accumulating for a short-term price increase due to increased concerns about supply shortage risks, along with capital flows into financial markets to seek profit opportunities.
Citi Group forecasts Arabica coffee futures will trade between $1.88 and $2.15 a pound through 2024, and even higher if demand is lower than expected. Record high Robusta prices will also boost Arabica prices.
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