Robusta coffee prices rose on the London exchange due to a weaker US dollar and continued supply concerns. Indonesia, the world’s third-largest robusta producer, is forecast to produce 8.4 million bags of coffee this year, down 20% from the previous crop, due to excessive rain during the flowering period, which has hampered pollination, according to the Foreign Agricultural Service (FAS) of the US Department of Agriculture (USDA). This is considered the worst harvest in the past 10 years.
Heavy rains and storms are forecast to disrupt the ongoing harvest in Indonesia’s coffee growing regions, which continues to support robusta coffee prices.
Along with the above information, the robusta inventory report as of June 6 continued to decrease by 1,970 tons, or 2.41% compared to the previous week, down to 79,640 tons.
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| Domestic coffee prices today (June 6) increased by 100 VND/kg in some key purchasing localities. (Source: Rodeo West) |
Meanwhile, the pressure of the new Arabica coffee crop continues to weigh on New York coffee futures despite reports of unfavorable weather in Brazil to speed up the harvest. Contributing to the decline in Arabica coffee prices is the sharp increase in the Real exchange rate against the USD to a 3-month high (1USD = 4.9120 R$), continuing to support Brazilians to boost sales of coffee and other agricultural exports.
However, the supply of Arabica coffee is not yet "safe" as the Arabica coffee inventory recorded by ICE - New York continues to decline without any additions in the past few months.
At the end of the trading session on June 6, the price of robusta coffee on the ICE Futures Europe London continued to increase. The price of robusta coffee futures for July 2023 delivery increased by 7 USD, trading at 2,614 USD/ton. The price of September delivery increased by 9 USD, trading at 2,583 USD/ton. Trading volume increased.
Arabica coffee prices on the ICE Futures US New York exchange decreased slightly. The July 2023 delivery futures increased by 0.5 cents, trading at 182.6 cents/lb. Meanwhile, the September 2023 delivery futures increased by 0.65 cents, to 179.55 cents/lb. Trading volume increased sharply.
Domestic coffee prices today (June 6) increased by 100 VND/kg in some key purchasing localities.
Unit: VND/kg. (Source: Giacaphe.com) |
Given the current market data, many investors are still leaning towards the Fed pausing its rate hikes at its next policy meeting in June. May consumer price inflation data due next week will be the next major US economic data, awaited to shed light on the US Central Bank's next course of action.
According to technical analysis, the technical indicators of robusta coffee are showing signs of continued downward momentum. It is expected that in the short term, robusta coffee prices will fluctuate and accumulate within the range of 2575 - 2630. Robusta prices need to increase above 2615 to continue to probe the resistance zone of 2630 - 2650. On the contrary, if the support zone of 2565 - 2570 is lost, robusta coffee prices may establish a downward trend.
For the Arabica market, technical indicators are showing that the downward momentum is still there. In the short term, Arabica prices are expected to fluctuate and accumulate within the range of 180 - 185. Arabica coffee needs to surpass 185 and close above this level to have a chance to recover. Conversely, if the 180 level is lost, a downtrend may be established.
Robusta coffee prices may increase further as the El Nino weather phenomenon is forecast to spread in the third quarter of 2023, raising concerns about a sharp decline in robusta coffee output in Vietnam and Indonesia, according to BMI Research of Fitch Solutions.
El Nino is a phenomenon of warmer and drier than normal weather in the tropical Central Pacific. Climate scientists predict that this year’s El Nino could hit in the second half of 2023. Southeast Asia recently saw a record heatwave in mid-May. “Across Southeast Asia, El Nino events with below-average rainfall and higher temperatures have 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 USDA forecasts robusta coffee production will decline by about 25%.
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