Coffee Prices Rise Again: All Changes Have Been Predicted; Is the Market Returning to Real Value?

The domestic coffee market continues to recover compared to the same time yesterday. Domestic coffee prices increased for the second consecutive day, following the momentum of the London exchange. The market is more stable after the recent panic selling.

Coffee prices on both floors continue to increase because information about the weather in Brazil has not improved during the preparation period for the Arabica coffee harvest. Inventories on the New York floor increased, but those on the London floor suddenly decreased, helping Robusta Coffee continue to recover.

Commenting on the fluctuations in coffee prices recently, Mr. Nguyen Ngoc Quynh, Deputy General Director of the Vietnam Commodity Exchange (MXV), informed the press that this was something that had been predicted in advance. The current sharp decrease is not too surprising; coffee prices are gradually returning to their real value after a period of being manipulated by hedge funds.

Although coffee prices have dropped sharply in recent days due to speculative manipulation, in fact the basic information about coffee on the market still tends to support prices, especially in the long term. On the supply side, supply risks in leading producing countries still exist, especially in Southeast Asia. Regarding demand, consumption of Robusta coffee in general and Vietnamese coffee in particular remains high.

Mr. Nguyen Ngoc Quynh forecasts that coffee prices are likely to continue to decrease in the next few weeks, reaching the price range at the end of 2023. After that, the price will gradually recover by the end of 2024 due to the fact that the actual supply is still uncertain.”.

According to analysis by experts, the recent fluctuations in coffee prices were predicted in advance. The current sharp decrease is not too surprising; coffee prices are gradually returning to their real value after a period of being manipulated by hedge funds.

The price of Robusta coffee on the London floor set a record of 4,500 USD/ton at the end of April. Although it has cooled down now, the price is still significantly higher than at the end of last year. Coffee prices on both floors continue to increase because information about the weather in Brazil has not improved during the preparation period for the Arabica coffee harvest.

Inventory on the New York floor increased, but inventory on the London floor decreased, also helping Robusta Coffee continue to recover. Inventories of graded and distributed Arabica coffee on the New York market are said to have decreased by 13,750 bags on May 9, recording this inventory at 687,673 bags.

Meanwhile, despite the sharp decline in coffee prices in recent days due to speculative manipulation, the basic information about coffee on the market still tends to support prices, especially in the long term. On the supply side, supply risks in leading producing countries still exist, especially in Southeast Asia. Regarding demand, consumption of Robusta coffee in general and Vietnamese coffee in particular remains high.

World coffee prices compiled and monitored by ICO (I-CIP) averaged 216.9 US cents per pound in April, a sharp increase of 16.4% over the previous month and up 21.5% over the previous month. same period last year. Corresponding to a price ranging from 193.4 to 235.5 US cents per pound, the highest level in the past 13 years.

According to ICO, in the first half of April, world coffee prices increased by 21.8% from 193.4 US cents per pound to 235.5 US cents per pound. Meanwhile, Vietnam continues to face supply difficulties due to consecutive decreases in harvest output in the 2022–2023 and 2023–2024 crop years.

The price increase trend continues in April 2024 due to unfavorable weather in Vietnam, affecting supply. Vietnam’s Ministry of Agriculture and Rural Development said Vietnam’s coffee output in the 2023–2024 crop year could decrease by 20% to 1.47 million tons, the lowest level in 4 years, due to drought.

This information has pushed the price of Robusta coffee in the Vietnamese domestic market to an unprecedented increase in just a few days. Last quarter, the conflict in the Red Sea also contributed greatly to local disruptions in coffee supply, pushing Robusta coffee prices to the highest level in the past 30 years.

In addition, the world depends heavily on high-quality coffee from Brazil every year, so unfavorable weather factors will likely cause further fluctuations in the coffee market in the short and medium term.

It is forecast that in the remaining months of the second quarter of 2024, world coffee prices will remain high. The European coffee consumer market is currently fluctuating due to the supply-demand imbalance from Vietnam after Robusta coffee output was lower than average in the 2022–23 coffee crop, estimated at 28.5 million metric tons covered in the 2023–2024 crop year.

Source: Tincaphe.com