| Robusta coffee prices continue to cause shock, domestic coffee prices may reach 150,000 VND/kg After a series of record increases for Robusta, export coffee prices have turned to decrease |
At the end of the weekend trading session, the price of Robusta coffee in London for July 2024 delivery decreased by 153 USD/ton, at 4,151 USD/ton, and for September 2024 delivery decreased by 150 USD/ton, at 4,065 USD/ton.
Arabica coffee prices for July 2024 delivery decreased by 4.1 cents/lb to 224 cents/lb, and for September 2024 delivery decreased by 3.9 cents/lb to 222.4 cents/lb.
At the end of the week, Robusta coffee futures for July delivery increased by a total of 71 USD. Arabica coffee futures for July delivery decreased by 7.85 cents. Domestic coffee prices continued to increase by an average of 8,000 VND/kg, continuously breaking down prices. Last week, domestic coffee increased by 13,000 VND/kg.
The supply of Robusta coffee, especially from Vietnam at this time, continues to be tight, continuing to push up coffee prices.
The aftermath of last year's El Nino lasting until early 2024 is having dire consequences for crops, especially coffee plants that need a lot of water but are struggling with the worst drought in years in Vietnam.
After a period of continuous increase at the beginning of the week, the two coffee exchanges fell sharply at the end of the week. The recovery of coffee inventories on the New York floor led to the liquidation of long positions by hedge funds at the end of the week.
Domestic coffee prices dropped sharply by 2,500 VND/kg in the last trading session of the week, losing the 134,000 VND/kg mark that had just been reached. Currently, the lowest trading price in Lam Dong is 131,100 VND/kg, the highest in Dak Nong is 131,700 VND/kg.
The sharp drop in coffee prices on Friday was a technical one as Robusta supplies previously dominated by Vietnam are looking to April 2024 receipts from Brazil and Indonesia to make up for it.
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| Coffee export prices fall sharply after a series of record highs |
Certified graded Arabica coffee stocks held on the New York market reportedly rose by 8,820 bags yesterday to 661,492 bags. The recovery in ICE-monitored coffee stocks led to a weekend of liquidation by funds, with funds reportedly cutting 2,728 lots from their coffee positions.
Domestic prices in Vietnam have surged to an all-time high in 2024, making it harder for exporters to find supplies and triggering a record wave of defaults on existing contracts, according to Bloomberg . Climate change is causing increasingly erratic weather and drier conditions will add to the pressure, with the global deficit expected to extend into a fourth year. Vietnam accounts for about a third of the world’s Robusta supply.
Farmers and agents may have failed to deliver 150,000 to 200,000 tons of coffee under contract since Vietnam began its 2023-24 harvest in October, according to estimates from seven traders compiled by Bloomberg. That’s equivalent to about 10% to 13% of the crop.
The Vietnam Coffee and Cocoa Association (Vicofa) said the main reason for the increase in coffee prices is that Vietnam's coffee inventory from the previous crop is at its lowest level in history. In previous years, Vietnam had an inventory of about 120,000 - 150,000 tons every year. However, in the 2023 crop, the inventory is very low, only 50% compared to previous years. Meanwhile, the output of the 2023 - 2024 crop is also estimated to decrease by 10% compared to the previous crop.
Domestic coffee prices have increased recently because only Vietnam is harvesting in the world at this stage. Indonesia harvests around April - May, and Brazil harvests around July.
Currently, the world's major roasters are present in Vietnam. Due to the scarce supply, every small change in the weather in the raw material area is also
European and American businesses took notice and it almost immediately affected the trading sessions in London. Now, Robusta coffee prices may have to wait for the decisive reaction of the new harvest in Indonesia and Brazil to see how it will affect the market.
The Brazilian Instant Coffee Association, or ABICS, reported that instant coffee consumption from the world's largest coffee producer increased by 5.30% in the first quarter of 2024.
ABIC, which assessed that the domestic coffee market in Brazil increased by 1.64% in volume between November 2022 and October 2023, domestic consumption was about 21.70 million bags, according to giacaphe.com.
This figure is a bit lower than many expected, however in terms of volume it would indicate that with a dedicated export consumer market demand of 40 million bags of coffee, Brazil needs to produce at least 61.50 million bags of coffee regularly each year, to meet domestic and export market demand.
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