Coffee prices reverse simultaneously, investors are pessimistic, will the Fed raise interest rates for the 10th consecutive time?

The International Coffee Organization (ICO) maintains its forecast that global supply will be short by about 7.3 million bags this year.

Global coffee prices turned up on both the London and New York derivatives exchanges, while the USDX continued to decline, restraining the consolidation of coffee futures prices. The more hawkish minutes of the US Federal Reserve (Fed) contributed to the pessimism of investors on Wall Street, causing US stocks to fall for the third consecutive session and the USDX to fall further.

Thus, the price of both robusta and arabica coffee has adjusted after the previous sharp decline due to concerns about short-term supply shortages, while major producing countries have just started harvesting the new crop of the 2023/2024 coffee season.

According to the latest report of the Foreign Agricultural Service (FAS) of the United States Department of Agriculture (USDA), Indonesia's robusta production in the 2023/2024 coffee crop year is estimated to decrease by 18% compared to the previous crop year, down to 9.7 million bags, the lowest level in 10 years due to excessive rain.

In addition to the rising exchange rate, which is restraining the consolidation of coffee futures, arabica coffee prices continue to be under downward pressure due to favorable weather conditions that are boosting the harvest in Brazil. According to the latest FAS report, Colombia's arabica production in the 2023/2024 coffee year is estimated to increase by 2% compared to the previous year, to 11.6 million bags due to favorable crop development. The information contributes to the pressure on arabica coffee prices.

Giá cà phê hôm nay 25/5/2023: Giá cà phê

Domestic coffee prices today, May 25, increased by 400 - 500 VND/kg in some key purchasing localities. (Source: Newtimes)

At the end of the trading session on May 23 on the international floor, the price of robusta coffee on the ICE Futures Europe London floor increased again. The price of robusta coffee futures for July 2023 delivery increased by 16 USD, trading at 2,573 USD/ton. The price of September delivery increased by 20 USD, trading at 2,530 USD/ton. Trading volume was below average.

Arabica coffee prices on the ICE Futures US New York exchange turned slightly up. The July 2023 delivery futures increased by 0.55 cents, trading at 188.00 cents/lb. Meanwhile, the September 2023 delivery futures increased by 0.55 cents, to 185.75 cents/lb. Trading volume increased above average.

Domestic coffee prices today, May 25, increased by 400 - 500 VND/kg in some key purchasing localities.

Average price	Change
USD/VND exchange rate	23,290	+ 30
DAK LAK	61,000	+ 500
LAM DONG	60,500	+ 500
GIA LAI	60,800	+ 500
DAK NONG	61,000	+ 400

Unit: VND/kg.

(Source: Giacaphe.com)

On May 24, the Fed released the minutes of its regular Federal Open Market Committee (FOMC) meeting in May 2023, mentioning the possibility of a "mild recession" in the US economy.

According to the minutes of the meeting, Fed economists assessed that tight financial conditions “will lead to a mild recession, beginning later this year, followed by a moderate recovery.”

The minutes said real GDP is expected to decline moderately in the next two quarters, with the rate of decline slowing in the fourth quarter of 2023 and the first quarter of 2024. At the May 2023 meeting, all 11 members of the FOMC voted in favor of raising interest rates for the 10th consecutive time, in an effort to curb rising interest rates. However, there was some disagreement among the leaders about what to do next.

According to technical analysis, yesterday's downward adjustment on the robusta floor is also understandable when previously robusta has increased continuously for many sessions. Technical indicators are showing that the downward momentum is still there. In the short term, robusta coffee prices are expected to fluctuate and accumulate within the range of 2500 - 2600. The price range of 2485 - 2500 is the near support zone of robusta prices. If robusta loses this price range, it can establish a downtrend.

Technical indicators on the Arabica market are showing neutral signals, the price trend is not clear. In the short term, Arabica prices are expected to fluctuate and accumulate within the range of 185 - 190. Arabica coffee needs to touch and maintain above 190 to have a chance to increase further. On the contrary, 180 - 182 is the near support zone of the price, if it loses the base of 180, it may trigger strong selling pressure.

Source