Coffee prices surge, Fed sure to cut interest rates in June?

The El Nino phenomenon often brings heavy rains in Brazil and droughts in Vietnam and India, negatively affecting world coffee production. Major coffee producing countries such as Brazil, Vietnam, Indonesia, and India are all affected by crop failures, with production decreasing by about 10-15%.

World coffee prices recovered strongly on all domestic and international exchanges. Of which, robusta coffee prices reached 3,095 USD/ton.

Domestic coffee prices have increased compared to the same time yesterday, increasing from 1,000 - 1,100 VND/kg, currently trading prices are very high, fluctuating between 83,800 - 84,600 VND/kg.

The highlight of this week's market developments is that although inventories on ICE exchanges have been replenished regularly in recent days, causing prices to fall in the short term, they are still hovering around a 24-year low, which is the main reason for the market price to increase again.

Meanwhile, the continued tight supply, at least in the short term, has helped the London futures price recover significantly in yesterday's trading session. According to the General Statistics Office of Vietnam's estimate, coffee exports in February 2024 reached only 160 thousand tons, down nearly 20% compared to the same period last year, due to the long Lunar New Year holiday, so commercial activities slowed down somewhat.

From Brazil, the country's real currency, although continuing to fall sharply to a three-week low, still does not encourage farmers to increase exports when they do not really need the money. In addition, a market survey shows that coffee futures prices often increase when farmers in the world's largest coffee exporting country are harvesting the new crop, for Conilon robusta coffee in April and May and for Arabica coffee in June and July.

The stock of certified Arabica coffee on the ICE-US exchange continues to recover, contributing to strengthening the supply situation in the market. At the end of the session on February 27, the amount of certified Arabica coffee on the ICE exchange increased by 992 60kg bags, bringing the total amount of coffee stored here to 333,771 60kg bags.

Giá cà phê hôm nay 21/3: sagdfaus. (Nguồn: YouTube)

Domestic coffee prices today, March 1, increased sharply by 1,000 - 1,100 VND/kg in some key purchasing localities. (Source: YouTube)

According to TG&VN, at the end of the last trading session of February (February 29), the price of robusta coffee on the ICE Futures Europe London exchange turned around and increased well, the delivery term for May 2024 increased by 51 USD, trading at 3,095 USD/ton. The delivery term for July 2024 increased by 41 USD, trading at 3,026 USD/ton. The average trading volume was low.

Arabica coffee prices on the ICE Futures US New York floor also increased, with the May 2024 delivery period increasing by 2.60 cents, trading at 184.35 cents/lb. Meanwhile, the July 2024 delivery period increased by 2.35 cents, trading at 182.70 cents/lb. The average trading volume was high.

Domestic coffee prices today, March 1, increased sharply by 1,000 - 1,100 VND/kg in some key purchasing localities.

Average price	Medium
USD/VND exchange rate	24,450	+ 20
DAK LAK	84,500	+ 1,000
LAM DONG	83,800	+ 1,100
GIA LAI	84,300	+ 1,100
DAK NONG	84,600	+ 1,100

Unit: VND/kg.

(Source: Giacaphe.com)

Coffee prices rebounded after US inflation data was released as expected by the market, experts said. US prices continued to rise in January 2024 but at the lowest level in nearly 3 years, reinforcing speculation that the US Federal Reserve (Fed) will definitely cut interest rates in June.

The report released by the US Department of Commerce on February 29 showed that the country's personal consumption expenditure (PCE) price index increased by 0.3% in January 2024 (compared to the previous month). In the 12 months ending in January 2024, the US PCE increased by 2.4% - the lowest increase since February 2021 and following a 2.6% increase in December 2023.

Excluding volatile components such as energy and food, the US core PCE price index rose 0.4% in January 2024.

Core inflation in January 2024 increased 2.8% year-on-year, the smallest increase since March 2021 and following a 2.9% increase in the final month of 2023.

The Fed typically monitors PCE to determine progress toward its 2% inflation target. A monthly reading of 0.2% is needed to bring inflation back to target.

Following the report, Wall Street's major stock indexes are expected to open higher in the same trading session as inflation readings matched estimates, raising hopes of a Fed rate cut in the first half of this year.

Mr. Peter Andersen, founder of investment management company Andersen Capital Management, assessed that the latest data makes the market more optimistic that the US economy is on a solid foundation.

Source