Coffee prices fall deeply. After a series of record highs, what’s the reason for this unexpected decline?

At the same time, they decreased sharply in the weekend session (April 27). The market temporarily withdrew when the fund liquidated its position. Domestic coffee prices dropped sharply by 2,500 VND/kg during the weekend trading session, losing the recently reached mark of 134,000 VND/kg. Currently, the lowest trading price in Lam Dong is 131,100 VND/kg, and the highest in Dak Nong is 131,700 VND/kg.

Coffee prices continue to increase sharply due to tight supply. In the Central Highlands, some coffee areas died due to a lack of irrigation water due to a prolonged drought. The coffee supply is in serious crisis and will remain scarce for a long time.

Statistics from the Department of Crop Production (Ministry of Agriculture and Rural Development) show that coffee and cocoa growing areas are gradually shrinking due to many years of falling coffee prices. Data collected by the end of 2022 shows that Vietnam has 656,000 hectares of coffee, of which the aging area is increasing. Compared to 2019, the coffee area in 2022 will decrease by 5%.

Coffee prices continue to escalate, making manufacturers and exporters worried when there are long-term, signed export orders. According to Mr. Phan Minh Thong, Chairman of the Board of Directors of Phuc Sinh Joint Stock Company, for export companies and foreign companies, because export contracts have been signed, they still have to buy coffee at high prices for delivery.

Coffee prices have increased to a record high, so farmers rarely send them to agents after harvest because they do not want to sell them all at once or 50% like every year, but keep them and wait to sell slowly. Therefore, low supply and high prices make the coffee market tense. Those are the basic outlines behind the seemingly brilliant picture of the current coffee market.

The sharp drop in coffee prices on Friday is a technical drop, while Robusta coffee supplies, previously mainly from Vietnam, are waiting for revenue from April 2024 from Brazil and Indonesia to compensate.

Stocks of certified-grade Arabica coffee held on the New York market were said to have increased by 8,820 bags yesterday, taking the stock to 661,492 bags. The recovery in coffee stocks monitored by ICE led to the liquidation of the funds’ long positions over the weekend, which reported that the funds cut 2,728 lots from their long coffee positions.

According to Bloomberg, domestic prices in Vietnam have increased to an all-time high in 2024, making it more difficult for exporters to find supply and causing a record wave of defaults on contracts. now available.

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 1/3 of the world’s Robusta coffee supply.

The Vietnam Coffee and Cocoa Association (Vicofa) said: The main reason for the increase in coffee is because the coffee inventory output from Vietnam’s old crop is the lowest in history. In previous years, Vietnam had an inventory of about 120,000–150,000 tons.

However, in the 2023 crop year, inventory output is very low, only 50% compared to previous years. Meanwhile, the output of the 2023–2024 crop year is also estimated to decrease by 10% compared to the previous crop year. Domestic coffee prices have increased recently because in the world at this stage, only Vietnam harvests. Indonesia harvests around April or May, while Brazil harvests around July.

Currently, the major roasters in the world are present in Vietnam. Because supply is scarce, every small change in the weather in raw material areas is also noticed by European and American businesses, and it affects the trading sessions in London almost immediately.

Currently, Robusta coffee prices may have to wait for the decisive reaction of the new autumn crop in Indonesia and Brazil to see how it will affect them.
What is the market like? 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 estimates that the domestic coffee market in Brazil has increased by 1.64% in volume between November 2022 and October 2023, with domestic consumption being about 21.70 million bags. This number is slightly lower than many people expected.

However, in terms of volume, it will be shown 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 the needs of domestic and export consumer markets.

Source: Tincaphe.com