Coffee Prices Drop Sharply, Pressure From Brazil, Market Difficult to Maintain Stability

Domestic coffee prices in the past 6 days have decreased by about 3,100–3,200 VND/kg. The highest transaction price is currently recorded at 124,000 VND/kg, and the lowest is 123,400 VND/kg.

After a sharp decline at the end of last week, the price of Arabica coffee for September delivery is still above the lowest level in the past 3 weeks, while Robusta has dropped to a new low in the past 3 weeks.

The pressure of coffee harvesting in Brazil is really putting pressure on coffee prices in the world market. Safras & Mercado said on July 26 that Brazil’s 2024/25 coffee harvest was 81% complete as of July 23, faster than the 74% in the same period last year and faster than the 5-year average of 77%. Of which, the amount of certified-grade Arabica coffee stored in the New York market increased by 2,495 bags on the last trading day of the week, reaching 814,801 bags.

Currently, coffee demand from European importers is increasing due to the trend of stockpiling inventory ahead of the deadline to comply with the European Union Deforestation Regulation (EUDR) standards. The EUDR is aimed at reducing the import of products related to deforestation and requires strict verification and traceability measures for items, including coffee.

From the perspective of technical analysts, this is actually the time to liquidate positions before the end of the trading period in July. With a volume of purchases equivalent to half of Vietnam’s output, the market is unlikely to maintain stability between liquidation and cessation of liquidation. However, the market still has factors that help slow down the decline of coffee.

At the end of the week, Robusta coffee futures for September delivery fell by $228 per ton. Arabica coffee futures for September delivery fell by 8.05 cents per lb. Domestic coffee prices lost an average of VND2,500/kg.

At present, the pressure of the coffee harvest in Brazil is putting pressure on coffee prices on both exchanges. Safras & Mercado said last weekend that Brazil’s 2024/25 coffee harvest was 81% complete as of July 23, faster than the 74% of the same period last year and faster than the 5-year average of 77%.

The amount of certified-grade Arabica coffee stored on the New York market increased by 2,495 bags on the last trading day of the week, reaching 814,801 bags.

Regarding the current price increase drivers, experts said that the export season in Mexico and Central America is about to end. Many forecasts indicate that coffee supplies from these countries are starting to tighten earlier in the 12-month export cycle than last year.

Vietnam’s coffee exports are falling due to low supplies. Climate change is forecast to threaten to sharply reduce Arabica coffee production by 2050, forcing the coffee industry to adapt, with Robusta emerging as a promising alternative.

Expert Nguyen Quang Binh added that the business position on the two exchanges is supporting the upward trend this week. Along with the eagerness to cut interest rates as soon as the Fed meets this week, the upward momentum of coffee this week will be wider.

Source: Tincaphe.com