Steady growth, outperforming other markets
After 10 years, since the commodity super cycle in 2011, the world has entered a period where prices have risen to a record high. The year 2021 also witnessed periods of sudden growth in many commodity groups such as agricultural products, metals, or energy. The staple commodities of each group have reached multi-year peaks such as the price of corn, which hit an eight-year high in April this year, or the price of crude oil, which hit a seven-year high in October. Copper and iron ore prices also hit all-time highs in May this year. However, after that, before the impact of the market, the prices of these items could not keep the upward momentum and peak.
On the contrary, although not receiving too much attention, coffee prices still grow well, and “stagnate” above 10-year peaks. In the group of industrial materials, the price of cotton had a similar increase, however, the prospect is somewhat inferior to the coffee market, so the momentum has been lost in the recent period.
In the past half year, the coffee market still witnessed very attractive increases when the price of Arabica increased by 41.6% to USD 5,228.3 / ton, while the price of Robusta increased by more than 50% to USD 2,406 / ton. Compared to other commodities such as crude oil, copper, or cotton, the increase in the coffee market is somewhat overwhelming. Besides, this upward momentum has not shown any signs of stopping, as the supporting factors for the price may still remain for the upcoming period.
Supply worries still push the market up
As with any other commodity or investment product, the price of coffee is also negatively affected by macro factors such as the epidemic or facing the US Federal Reserve (FED) will tighten. tight monetary policy in the near future. However, the steady increase of both Arabica and Robusta coffee products has received great support when the supply of the world’s two largest coffee producing countries, Vietnam and Brazil, is in a state of low supply. decreased significantly.
As for the Arabica market, Brazil’s production was hit hard by drought and frost in the past year. Not only has the output of the 2022/23 crop decreased, but the potential of the following crops is also severely damaged, because coffee is a perennial cash crop, and it will take a long time for the tree to grow. The standard inventory level of Arabica on the US ICE Department has continuously decreased from mid-August until now, and the latest inventory level recorded on December 15 is nearly 30% lower than 4 months ago, currently 1, 56 million 60kg bags.
As for the Robusta market, the supply in Vietnam is still the factor that investors are most interested in. Currently, the key coffee growing areas of our country, with an area of more than 100,000 hectares, are all entering the harvesting stage, however, progress may be delayed due to the scarcity of workers to harvest. Due to the impact of the Covid-19 epidemic, the number of workers pouring into the Central Highlands provinces is much less than every year. This will not only negatively affect our country’s export supply of coffee at the beginning of next year, but will also slow down the pace of cultivation in the new crop year.
The tight supply is also reflected in the export figures of both Vietnam and Brazil. From 2020 to now, both countries’ coffee exports have decreased. In the most recent report of the Brazilian Coffee Exporters Association (Cecafe), the country’s export volume in November decreased by nearly 40% compared to the same period last year. Vietnam’s export volume has also tended to decrease year-to-date, due to a shortage of containers and congestion at ports.
However, according to the latest report of the General Department of Customs, our country’s November exports reached more than 107,000 tons, 8.3% higher than October. The more positive November data most likely comes from the The amount of goods that had been piled up from previous months to November could not be circulated, and the supply chain congestion had eased.
But the prospect of consumption still faces many difficulties
In addition to the supply news, the consumption outlook is also a strong catalyst for the coffee market. Currently, developments surrounding the spread of the Omicron variant in Europe and North America, which are the two largest coffee consuming regions in the world, are constraining the growth of the coffee market.
There have been many studies showing that the currently popular vaccines of manufacturers such as Moderna, Pfizer are not completely effective against the Omicron variant. Governments of other countries are also planning a third injection combined with distancing measures. However, during the implementation period, the activities of restaurants and cafes may be limited because of the blockade orders, so the demand for coffee may decline in the coming period, despite the fact that other countries The West is entering the year-end holiday.
In that context, the Robusta market will receive more support because the demand for coffee at home will increase sharply. At the same time, the Robusta price is also 56% cheaper than the Arabica price, so this is an extremely attractive discount for coffee roasters. This is also a good opportunity for our country’s coffee exporters because Vietnam is currently the number one Robusta producer in the world.
According to the Vietnam Commodity Exchange, there is still room for growth from now to the end of the year, however, the growth may not be as strong as before because supply is gradually recovering and most of These concerns were reflected in the price. Supply chain congestion has improved compared to the previous period, but coffee demand is still affected by the impact of successive outbreaks, which will be a challenge for the coffee market as well. as coffee exporters of our country.
