Concerns about Robusta supply prospects from Vietnam, coffee export prices will increase again

In the trading session on June 19, Robusta coffee prices increased by 1.65%, reaching over 4,060 USD/ton, while Arabica coffee was on holiday. Concerns about low coffee output in the 2024-2025 crop year are still supporting prices. Rains have returned to the main coffee growing areas but have not been able to completely overcome the damage caused by drought at the beginning of the year. Analysts are concerned that the next coffee crop in our country will be at a low level for many years.

Coffee prices will rise again, mainly due to investors' increasing concerns about the supply prospects from Vietnam. Currently, hedge funds have increased their net buying positions with the forecast that Robusta supply from Vietnam will continue to be scarce in the coming time, the Import-Export Department forecasts.

In the context of a single market, Robusta coffee prices on the London floor increased sharply again. Strong buying power at the end of the session from speculators on the floor helped Robusta increase well. However, according to experts, all three important components of the market still hold a large amount of buying positions, promising to continue to liquidate their buying positions. Continued selling will shake the market for the rest of June.

Concerns about the prospect of Robusta supply from Vietnam, export coffee prices will increase again

Meanwhile, regarding Vietnam's Robusta supply, many leading businesses said that the amount of goods in stock will only be enough to sell until around June 2024, and will not be able to last until the new harvest. Drought and pests have severely affected coffee productivity in many places. Vietnam's coffee output in the 2023-2024 crop year is estimated to decrease by 20% compared to the previous crop year, down to 1.47 million tons, the lowest in 4 years, putting pressure on the Robusta supply in the world market.

Vietnam's Robusta coffee output in the 2024/2025 crop year is estimated at 24 million bags, the lowest level in 13 years, due to unfavorable weather, according to Volcafe, a trading house.

At the end of the first 8 months of the 2023-2024 crop year (October 2023 to May 2024), Vietnam exported nearly 1.2 million tons of coffee, equivalent to 80% of the current crop year's output and down 7% compared to the same period last crop year.

The USDA’s Foreign Agricultural Service (FAS) forecasts that world coffee production in 2023/24 will increase by 4.2% year-on-year to 171.4 million bags, with Arabica production rising by 10.7% to 97.3 million bags. Robusta production, meanwhile, will decline by -3.3% to 74.1 million bags.

USDA's FAS forecasts 2023/24 ending stocks to decline by 4% to 26.5 million bags from 27.6 million bags in 2022/23; Brazil's 2023/24 Arabica coffee production will increase by 12.8% year-on-year to 44.9 million bags due to higher yields and increased planting area; Colombia's 2023/24 coffee production, the world's second-largest Arabica coffee producer, will increase by 7.5% year-on-year to 11.5 million bags.

According to a recent assessment by the Vietnam Coffee and Cocoa Association (VICOFA), the domestic coffee supply is now almost exhausted, and the inventories of businesses and farmers are not large, so the export volume from now until the end of the season (September 2024) will gradually decrease even though coffee prices are at a record high.

This shows that the domestic coffee supply from now until the new crop year is not much left.

Sharing the same opinion, the two leading enterprises exporting green coffee beans in the Central Highlands region, Vinh Hiep Company Limited (Gia Lai province) and 2/9 Dak Lak Import-Export Company Limited (Simexco Daklak), both said that the amount of goods in stock will only be enough to sell until about June 2024, not until the new harvest.

Sharing more about the phenomenon of some businesses suffering heavy losses when coffee prices fluctuated strongly, Mr. Thai Nhu Hiep - Director of Vinh Hiep said that short selling was the main cause of losses when they thought that Vietnam's coffee supply was still abundant and prices would fall, as well as subjectively thinking that they could find cheap coffee sources from other countries to offset the contract.

But in reality, with low coffee prices over the past 20 years, farmers have abandoned many coffee trees, combined with historic drought caused by El Nino, causing this year's output to plummet, pushing coffee prices to continuously break the peak.

Meanwhile, Mr. Le Duc Huy - General Director of Simexco Daklak warned that the difficulties of the old crop have not passed, the difficulties of the new crop are still continuing, due to the El Nino effect causing the temperature in the Central Highlands to be very high, leading to a serious drought, the water on the surface has been depleted, not enough water to irrigate the coffee gardens, the current rain is still not enough, if not ensuring enough irrigation water, it will be very difficult to ensure the coffee yield of the new crop.

Currently, it is not possible to calculate statistics, but it is certain that the coffee output in the 2024-2025 crop year will not be equal to the previous crop year, so the Vietnamese coffee industry needs to prepare more defensive scenarios and better control risks in the new coffee crop year.

According to some industry experts, in the coming time, coffee prices will likely not fluctuate as strongly as in recent months but will still maintain a high level. The reason is that Brazil is in the peak harvest season. Then, in October, it will be the harvest season in Vietnam.

Source: https://congthuong.vn/lo-ngai-trien-vong-nguon-cung-robusta-tu-viet-nam-gia-ca-phe-xuat-khau-se-tang-tro-lai-327160.html

Source: https://www.vietnam.vn/lo-ngai-trien-vong-nguon-cung-robusta-tu-viet-nam-gia-ca-phe-xuat-khau-se-tang-tro-lai/