Coffee Prices Have Increased to “Unbelievable” Levels: How High Will They Be in 2024?

On the London market, Robusta coffee trading prices in the last days of 2023 are at a high level, at one point reaching a record level of more than 3,000 USD/ton. There were sharp drops on all domestic and foreign exchanges, in the sense that most commodity markets dropped quite sharply in the last trading session of the year.

Domestic coffee prices at the end of the year dropped sharply by 1,800 VND/kg, trading between 67,400 and 68,200 VND/kg. Observers said that the year-end trading session witnessed liquidation and profit-taking by funds and speculators in the context of no change in fundamental factors.

In addition to limited supply, there is also an important reason: the Asia-Europe maritime transport route through the Suez Canal was attacked by Houthi forces, causing demand for spot goods to become tense.

In the context of a holiday on the two world coffee floors, domestic coffee prices still increased slightly. This year’s harvest in Vietnam has come to an end. The increasing trend of using Robusta globally helps Vietnamese coffee improve its position.

Inflation in many major economies increased the cost of living and reduced disposable income levels over a very long period of time for much of the world. Therefore, the demand is gradually shifting to the “bitter rich” and cheaper coffee series Robusta.

According to many experts and businessmen, Vietnamese coffee prices will still have a positive outlook in 2024. Coffee export companies are also worried that, maybe only until May or even April. 2024, there will be no more coffee for businesses to buy.

According to estimates, there is a shortage of about 1.5–2.5 million bags of coffee according to the contract, which needs to be met from the current coffee harvest. With the current continuous price increase, many leading industry experts predict that exports can earn 5 billion USD by 2024.

According to the latest report of the Import-Export Department (Ministry of Industry and Trade), in the first days of December 2023, Robusta coffee prices in the domestic market increased sharply compared to the end of November 2023. Recorded on December 9, the price of Robusta coffee increased by 1,800–2,000 VND/kg compared to November 30, 2023.

Domestic coffee prices are maintaining a high level at the beginning of the season due to large purchasing demand from export and FDI enterprises. Faced with this situation, many forecasts show that from now until the end of April 2024 (when Indonesia enters the new crop), the scarce supply situation will still occur, causing Vietnam’s domestic coffee price to increase at least. until April 2024.

According to statistics from the General Department of Customs in November 2023, Vietnam’s coffee exports reached approximately 119.3 thousand tons, worth 356.67 million USD, an increase of 172.8% in volume and an increase of 126,000 tons. 4% in value compared to October 2023, down 7.4% in volume compared to November 2022, but up 16.8% in value.

In the first 11 months of 2023, Vietnam’s coffee exports reached 1.41 million tons, worth 3.64 billion USD, down 10.4% in volume but up 0.4% in value over the same period. last year.

Meanwhile, dry weather in Brazil in recent months and the formation of the El Nino weather phenomenon in the Pacific Rim have caused supply concerns from countries in the world’s largest Robusta-producing region. gender. It is forecast that the harvest will decrease by at least about 6 million bags in the upcoming coffee season.

Robusta coffee prices have increased by 42% this year. The risk of crop damage in Brazil is increasing, raising concerns about supply. Meanwhile, the world’s leading Robusta coffee exporter, Vietnam, also faces negative impacts from El Niño this year.

With the US Federal Reserve’s (Fed) interest rate-cutting roadmap, how far will the weakening USD, along with concerns that inventories will continue to decline, push coffee prices up in 2024? The main reason for this unprecedented increase is the fear of declining supply, especially of Robusta from Southeast Asia.

At the end of 2023, the information that the Vietnam Coffee and Cocoa Association (Vicofa) is estimated to be lacking about 1.5–2.5 million bags of coffee under the contract makes the market even more excited. Vietnam’s coffee inventories and reserves are considered to have never been as low as they are today.

Meanwhile, at producer Brazil, dry weather threatens to damage Brazilian Robusta coffee trees. This entails the risk that instant coffee prices may become more expensive. Lack of rain and above-average temperatures are expected to cause Brazilian Robusta coffee production to be lower than expected.

The impact of the El Niño weather pattern will reduce output in the main production area of Robusta beans, the main ingredient used in instant coffee. Some Brazilian Robusta coffee-growing cooperatives say output will likely be 15% to 20% lower than initial estimates.

If this forecast comes true, this will be the crop with the lowest output since 2020, with less than 20 million bags. Coffee-growing areas north of Espirito Santo are not expected to experience widespread rain at this time of year. That makes many people worry about the harvest in May, especially when temperatures are high.

Source: Tincaphe.com