Robusta coffee prices may still increase sharply when the El Nino weather phenomenon is expected to spread in the third quarter of 2023, raising concerns about robusta coffee production in Vietnam and Indonesia, according to research unit BMI of Fitch Solutions.
The world price of Robusta coffee increased on the London floor due to the decline of the US dollar and limited supply information. In particular, this year's output of the world's third largest robusta producer - Indonesia will decrease by up to 20% compared to the previous crop, to 8,4 million bags, due to excessive rain during the flowering stage that has prevented pollination, according to the forecast of the Foreign Agricultural Service (FAS) of the US Department of Agriculture (USDA). This is considered the worst harvest in the past 10 years.
The weather in the Indonesian coffee regions is very rainy and storms are forecast to interfere with the ongoing harvest. The above information continues to support robusta coffee prices.
Along with the above information, the robusta inventory report as of June 6 continued to decrease by 6 tons, or 1.970% down from a week earlier, to 2,41 tons.
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| Coffee prices in the country today (June 6) increased by 6 VND/kg in some key purchasing localities. (Source: Rodeo West) |
While the pressure of the new arabica coffee crop continues to weigh on New York futures coffee prices despite reports of weather in Brazil with a lot of rain, it is not favorable to accelerate the harvest. Contributing to the decline in the price of arabica coffee was the real appreciation of the real against the USD to a 3-month high (1USD = 4,9120 R$), continuing to support Brazilians to boost the sale of coffee and export agricultural products.
However, the supply of arabica coffee is not "safe" as arabica coffee inventories recorded by ICE - New York continue to decline without seeing any replenishment in the past few months.
Ending the session on June 6, the price of robusta coffee on ICE Futures Europe London continued to increase. Robusta coffee price for delivery in July 6 increased by 7 USD, trading at 2023 USD/ton. September delivery term increased by 7 USD, traded at 2.614 USD/ton. Trading volume increased.
The price of arabica coffee on ICE Futures US New York dropped slightly. Futures for delivery in July 7 increased by 2023 Cent, trading at 0,5 Cent/lb. Meanwhile, the term for delivery in September 182,6 increased by 9 Cent, to 2023 Cent/lb. Trading volume increased sharply.
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Coffee prices in the country today (June 6) increased by 6 VND/kg in some key purchasing localities.
Unit: VND/kg. (Source: Giacaphe.com) |
With the current market data, many investors are still leaning towards the Fed will pause to raise interest rates at the next policy meeting in June. May consumer price inflation data to be released next week will be the next big US economic data, waiting to see clearly the next direction of the US Central Bank.
According to technical analysis, the technical indicators of robusta coffee are showing that the bearish momentum is still there. It is expected that in the short term, Robusta coffee prices will struggle to accumulate within the range of 2575 – 2630. Robuta price needs to rise above 2615 and continue to explore the resistance area of 2630 – 2650. On the contrary, if it loses the support area of 2565 – 2570, Robusta coffee prices can establish a downtrend.
As for the arabica market, the technical indicators are showing that the bearish momentum is still present. It is expected that in the short term, arabica price will struggle to accumulate within a range of 180 - 185. Arabica coffee needs to surpass 185 and close above this level to have a chance to rebound. Conversely, if the 180 level is lost, a downtrend can be established.
El Nino is a weather phenomenon that is hotter and drier than usual in the tropical Middle Eastern Pacific Ocean. Climate scientists predict that this year's El Nino could fall in the second half of 2023. Southeast Asia recently saw a record heatwave in mid-May. The BMI report said: "Across Southeast Asia, El Niños with below-average rainfall and higher temperatures have reduced coffee production."
According to the Food and Agriculture Organization, Vietnam, Indonesia and Brazil are the world's largest producers of robusta coffee. USDA forecasts robusta coffee production will decrease by about 25%.
