The rising USD pulled down coffee prices on both floors. The market has not shown signs of improvement since the beginning of the new year. In the early morning of January 4 on the US market, the US Dollar Index (DXY), measuring fluctuations in the greenback with six major currencies (EUR, JPY, GBP, CAD, SEK, and CHF), increased by 0.28% and reached the mark of 102.48.
The USD has risen to its highest level in the past 2 weeks as investors continue to take profits in the USD after being accumulated at the end of last year. In the context of many market doubts surrounding the Federal Reserve’s (Fed), it is likely to cut interest rates about six times by 2024.
Meanwhile, tensions in the Red Sea caused oil prices to skyrocket, and concerns about increased risks caused most investors to continue to stand outside the markets, waiting to hear more. Robusta coffee prices continue to adjust due to pressure from new crop sales from Vietnam.
The General Statistics Office of Vietnam estimates that coffee exports in December will reach about 190 thousand tons, down 3.5% over the same period last year, bringing coffee exports for the whole year 2023 to an estimated 1,606 million tons, down nearly 10 million tons compared to 2022.
When commenting on the global coffee supply and demand situation, Mr. Steve Wateridge, Head of Research, Tropical Research Service, said: The world will not lack or encounter difficulties in Arabica supply, but there will be difficulties. towel with Robusta.
The harvest will end six months earlier than in other coffee-growing countries, which is an advantage of Vietnamese coffee, and next year, if there is a suitable crop, we can catch up with this trend. According to a USDA report, global coffee production in the 2023–2024 crop year is forecast to reach 171.4 million bags (60 kg/bag), an increase of 4.2%, equivalent to 6.9 million bags compared to the crop year. before.
Increased production in key Arabica coffee-producing countries such as Brazil, Colombia, and Ethiopia is expected to offset the decline in Indonesia, one of the main Robusta-producing countries in Southeast Asia. With this forecast, global Arabica coffee production in the 2023–2024 crop year is expected to increase by 9.4 million bags to 97.3 million bags.
In contrast, Robusta decreased for the second consecutive year to 74.1 million bags compared to 76.6 million bags in the previous crop year, which was the lowest level in the last 4 crop years. Last year, Arabica coffee prices recorded an increase of 12.6%, while Robusta increased by 58% due to a decline in exports from leading producer Vietnam, while demand was strong.
The USDA forecasts that Vietnam’s Robusta coffee output in the 2023–2024 crop year will be about 26.6 million bags, an increase of 1.2% compared to the previous crop year, while Arabica consumption decreased by 11.1% to 880,000 bags. However, Vietnam’s total supply is still lower than the previous crop year because the inventory in the 2022–2023 crop year only reached 390,000 bags, a sharp decrease from 3.58 million bags in the 2021–2022 crop year.
Therefore, Vietnam’s green coffee exports are forecast to decrease by 2.4 million bags to 23 million bags. Inventories at the end of the 2023–2024 crop year are expected to remain low at 359,000 tons. In 2023, it was recorded that by June there was almost no coffee left in the population, but in 2024, it may only be in April or May that this will happen.
From now until April 2024, if EU coffee importers buy Robusta coffee, they can only rely on Vietnam when other major Robusta-producing countries are not yet in season. Therefore, Robusta’s upward momentum is still very bright.