Global coffee prices reversed course and fell as expected at the end of the week after an overheated market. However, spot demand and buying power from funds and speculators remained strong, supported by the US dollar, which is currently losing value against emerging currencies.
Domestic coffee prices have increased sharply over the past six days. At the end of the week, localities recorded an increase of about VND3,400 - 3,600/kg compared to the beginning of the week.
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| Domestic coffee prices fell by 300 - 400 VND/kg in some key purchasing localities during the trading session last weekend (June 10). (Source: doanhnhan.biz) |
The unusual weather conditions during this time and continuing into the second half of the year are expected to have a significant impact on the coffee market. Brazil and other parts of South America have been hit by persistent droughts with high temperatures and low rainfall, causing agricultural output in the world’s largest coffee producer to plummet.
Now, El Nino is forecast to make the coffee production problem worse, as rising water temperatures associated with the phenomenon could cause drought and flooding, damaging crops in one of the world’s other major coffee-growing regions. Major producers Indonesia and Vietnam are also likely to experience El Nino this year.
At the end of the trading session last weekend (June 9), the price of robusta coffee on the ICE Futures Europe London exchange turned down. The price of robusta coffee futures for July 2023 delivery decreased by 32 USD, trading at 2,728 USD/ton. The price of September delivery decreased by 24 USD, trading at 2,702 USD/ton. Trading volume increased.
Arabica coffee prices on the ICE Futures US New York floor also decreased. The July 2023 delivery period decreased by 4.2 cents, trading at 190.65 cents/lb. Meanwhile, the September 2023 delivery period decreased by 3.7 cents, to 186.65 cents/lb. Trading volume increased sharply.
Domestic coffee prices decreased by 300 - 400 VND/kg in some key purchasing localities during the trading session last weekend (June 10).
Unit: VND/kg. (Source: Giacaphe.com) |
According to CNBC , harsh weather conditions due to the approaching El Nino are raising concerns that robusta coffee production in major producing countries such as Vietnam and Indonesia could be affected, leading to a spike in prices.
In a recent report, Fitch Solutions' BMI research unit said the El Nino weather phenomenon is expected to spread in the third quarter of 2023, raising concerns that robusta coffee production will decline sharply in Vietnam and Indonesia.
Robusta coffee beans are known for their more bitter and acidic properties, and contain more caffeine than arabica beans.
Brazil’s robusta crop has also been hit by drought, the report said, meaning prices for instant coffee and espresso, which are typically made with robusta beans, could come under pressure amid supply concerns and higher-than-normal demand for robusta as consumers switch to cheaper alternatives to arabica beans.
El Nino is a phenomenon of warmer and drier than normal weather in the tropical Central Pacific Ocean. Climate scientists predict that this year's El Nino could occur in the second half of 2023.
Southeast Asia recently saw a record heatwave in mid-May. “Across Southeast Asia, the El Nino phenomenon with below-average rainfall and higher temperatures has reduced coffee production,” the BMI report said.
Vietnam, Indonesia and Brazil are the world’s largest producers of robusta coffee, according to the Food and Agriculture Organization. The US Department of Agriculture (USDA) forecasts robusta coffee production will decline by about 25%.
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