Coffee Prices Increase Simultaneously: Robusta Enters Upward Cycle, Two Price Scenarios in Vietnam

They all increased again after a strong correction. Domestic coffee prices fluctuate between 126,600 and 127,500 VND/kg while consumer goods have run out.

Since the beginning of the week, the coffee market has continuously reversed. Last session, coffee exchanges were positively influenced by information that US inflation cooled sharply in June, causing the US Federal Reserve (Fed) to likely reduce interest rates soon.

The Wall Street Journal commented: After the latest CPI report, the possibility of the US Federal Reserve (Fed) lowering interest rates in September has increased. The US Central Bank is keeping interest rates in the range of 5.25–5.5%, the highest in more than 22 years.

Market developments show that most major investment components in the market have taken steps to liquidate small buying positions in recent times. What is worth mentioning here is that the liquidation of these components was carried out during Brazil’s winter time, along with unfavorable news about the seasons of the countries that helped them liquidate their long positions at high prices. best of all time.

In fact, the market situation does not have enough good information for coffee to lower prices, and the possibility of price increases is even greater. Information from inland Brazil is currently in the harvest season, which is likely to be lower than the initial forecast, with the warning that this largest coffee-producing country has enough financial capacity to hold back its goods.

While Brazil, Colombia, Peru, Indonesia, Uganda, and smaller producers in East and Central Africa are currently harvesting to supply the 2024–25 coffee season, The main harvests from Colombia, Central America, Mexico, Vietnam, India, and China are all set to begin harvesting in Q4.

On July 9, the price of Robusta coffee delivered in September increased to a new record high of 4,667 USD/ton. Prices increased after the General Department of Vietnam Customs announced data showing that coffee exports in June only reached 70,202 tons, down 11.5% compared to May.

Vietnam’s cumulative coffee export output in the first six months of the year reached 893,820 tons, down 11.4% over the same period last year. At the end of the most recent session, Robusta prices were also approaching historical peaks.

The Robusta coffee market has entered a strong price increase cycle over the past 18 months as large producers like Vietnam struggle to meet rapidly growing demand.

Stocks of graded and certified Arabica coffee held on the New York market decreased by 5,330 bags yesterday, placing the stock at 803,319 bags. Robusta coffee inventories have also increased to the highest level in the past year of 6,057 lots.

The overall balance between supply and demand leans towards a more widely accepted view that weather fluctuations or any other unforeseen climatic events, especially in major producing countries such as Brazil, Vietnam, Colombia, and Indonesia, which produce an average of 120 million bags and export an average of 80 million bags of coffee to the consumer market, will be closely monitored ahead of the next coffee production cycle in 2025/26.

Vietnam Commodity Exchange (MXV) just released two coffee price scenarios in the context of the expectation that La Nina can replace El Nino by the end of this year in Vietnam. Scenario one: La Nina replaces El Nino at the end of this year, promoting frequent storms and floods in the Central Highlands region. The weather scenario in 2022 is likely to repeat itself.

La Nina will directly affect Vietnam’s 2024–2025 coffee supply, making the supply deficit more serious. With this scenario, MXV predicts that green coffee prices in Vietnam will skyrocket and exceed the historical peak set in April.

Second scenario: La Nina still replaces El Nino, but there are no storms or floods that hinder farmers’ harvesting activities. In this context, Vietnam’s coffee output in the 2024–2025 crop will not go in a more negative direction than at present.

However, the market is still worried about weather changes, combined with output that is already forecast at a low level, causing supply shortages, and this will be a supporting factor for prices. With this scenario, MXV forecasts that coffee prices at the end of the year will remain high but cannot exceed the historical peak of nearly 135,000 VND/kg.

Source: KTĐT.vn