| Under pressure from Brazil's new crop, Arabica coffee prices weakened. Export prices fell slightly, and inventories continued to recover, causing Arabica prices to fluctuate. |
At the close of trading this weekend, Robusta coffee prices in London for May 2024 delivery fell by $22/ton to $3,744/ton, and for July 2024 delivery fell by $19/ton to $3,679/ton.
Arabica coffee prices for May 2024 delivery increased by 5.75 cents/lb, reaching 212.5 cents/lb, while July 2024 delivery increased by 5.2 cents/lb, reaching 211 cents/lb.
The market continued to move in opposite directions, with Arabica coffee rising to its highest level in over six months. New York rose for two consecutive sessions but failed to pull London prices up. Robusta prices fell due to profit-taking following a surge in coffee inventories to their highest level in two and a half months, reaching 3,094 lots.
Concerns that excessive drought in Vietnam will continue to limit Robusta coffee production in the coming seasons, while the existing supply shortage is difficult to compensate for from other sources, remain factors driving Robusta coffee prices and supporting the upward trend in Arabica coffee prices.
According to CEPEA, the Conillon robusta crop has begun harvesting in some regions, while domestic prices in Brazil have surpassed 1,000 Real/60 kg bag for the first time. Similarly, Indian coffee prices are also moving in sync with global robusta prices, experiencing a strong upward trend due to supply disruptions from leading producer Vietnam. India's exports in the fiscal year ending March 2024 reached a record value, exceeding $1.26 billion, thanks to the high price of robusta coffee.
According to the Vietnam Coffee and Cocoa Association (Vicofa), the impact of climate change and the El Nino phenomenon causing droughts across coffee-growing regions globally has led to a decline in production. In Vietnam alone, production is expected to fall by 10% in the 2023-2024 crop season due to farmers switching to higher-value crops. Meanwhile, inventories at businesses are at record lows, and limited supply is driving up prices. Therefore, exports are expected to decrease from now until the end of the season.
In addition, geopolitical conflicts and tensions in the Red Sea region have led to increased shipping costs and other expenses. The rise in coffee prices is also due to speculation from many financial investors.
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| Coffee is currently the second-highest export item in the agricultural sector. |
In the first quarter of 2024, Vietnam exported approximately 600,000 tons of coffee, generating around $1.9 billion in revenue. While the volume increased by just over 3%, the export value rose by over 54%.
According to the Ministry of Agriculture and Rural Development , coffee is currently the second-highest export item in the agricultural sector, second only to wood products and surpassing even seafood.
Vietnam's leading coffee export markets in recent times have remained the EU, Japan, the US, and Russia… Among these, the EU continues to be Vietnam's largest coffee export market.
According to experts, the severe drought in the Central Highlands will continue to negatively impact the outlook for Robusta coffee production. This has also been a driving force behind the recent increase in Robusta coffee prices both domestically and internationally.
Notably, the supply situation for Robusta coffee from India is also considered unfavorable due to drought. Coffee traders in Bangalore (India) say farmers are limiting sales in anticipation of further price increases, making it difficult for exporters to fulfill existing contracts.
India's coffee exports in the financial year ending March 2024 reached a record high of over $1.26 billion, mainly driven by unprecedentedly high Robusta coffee prices.
Analysts believe that the simultaneous supply shortages in India and Vietnam will make it difficult for global coffee prices to cool down anytime soon.
Forecasting future coffee prices, Citi Group believes that the current record-high coffee price trend still has room to set new record highs amid unfavorable weather conditions and continuing demand.
In the commodities market, Citi Group analyzes that coffee prices have broken through short-term resistance and are accumulating for a short-term price increase due to increased concerns about supply shortages, along with capital flowing into financial markets to seek profit opportunities.
Citi Group forecasts that Arabica coffee futures prices will trade in the range of $1.88 - $2.15 per pound from now until the end of 2024, and could even be higher if supply is lower than expected. The record high price of Robusta coffee will also drive up Arabica coffee prices.
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