July Arabica coffee traded on Friday weekend closed down 4.10 cents/pound and Robusta coffee closed down $151/ton, at $4,151.
Stocks of certified graded Arabica coffee held on the New York market are said to have increased by 8,820 bags yesterday, taking the stock at 661,492 bags.
The recovery in coffee stocks monitored by ICE led to the liquidation of the funds’ long positions over the weekend, with the funds reportedly cutting 2,728 lots from their long coffee positions.
So we can see that the decline on Friday session is a technical decline while the previous supply of Robusta coffee was mainly from Vietnam and is expecting revenue from April 2024 from Brazil and Indonesia. offset.
Fund purchases have supported a spike in coffee prices this month. Last Friday’s weekly Commitments of Traders (COT) report showed that major hedge funds increased their Arabica coffee positions further, to a record 71,914 lots. Record long-term long positions exacerbate the pressure to liquidate positions each time these funds enter a liquidation period.
Last year’s El Nino weather event has now been confirmed as the cause of drought in Vietnam’s coffee growing regions this year, causing coffee prices to skyrocket as Vietnam’s supply increases. Already having problems since the fall 2022 crop, it is now exacerbated by prolonged drought, causing the fall 2024/2025 crop, which farmers foresee will have very heavy losses.
According to a source from Bloomberg sent from Ho Chi Minh City:
Domestic prices in Vietnam rose to an all-time high in 2024 as farmers and middlemen continued to hold stocks so as not to miss out on better prices after the previous year’s weak harvest in 2023-2024. This has made it more difficult for exporters to find supplies and caused a record wave of defaults on existing contracts.
Climate change is causing increasingly erratic weather and drier conditions will add to the pressure, with the global deficit expected to extend into a fourth year. Vietnam accounts for about a third of the world’s supply of Robusta coffee, which is often used in instant drinks and espresso.
A major Vietnamese exporter, said: “We cannot know when prices will peak.” Farmers and agents expect the price of green coffee to reach 150,000 VND, which is about 6,000 USD/ton, increasing even more from the current level of about 130,000 VND.
Fluctuations in commodity prices take time to impact the retail level and smaller increases in the price of Arabica coffee – are helping to alleviate some of the pain for coffee drinkers. However, the chief executive of Tata Consumer Products, which makes instant coffee and coffee pods, said this week that Robusta coffee prices are likely to fluctuate “for some time.”
According to the head of the Buon Ma Thuot Coffee Association, Mr. Trinh Duc Minh, from Dak Lak province, said many lakes used to irrigate crops in the Central Highlands are at extremely low levels and underground water sources have been exhausted. He forecasts the province’s 2024-2025 harvest could be 15% lower than the estimated 520,000 tonnes harvested in 2023-2024 – down from the previous year
A person growing on 6 hectares of coffee in Gia Lai province said: “We don’t have water for our farm. Some of his trees are infected with white mealybugs due to the hot weather. “If the drought lasts, we won’t have much new coffee to sell in the new crop.”
Currently, hoarding is also helping to push prices higher. Some Vietnamese farmers have relied on income from selling other fruit grown in their fields to cover living and production costs, allowing them to keep more coffee.
According to estimates from 7 traders compiled by Bloomberg, farmers and agents may not have been able to deliver 150,000 to 200,000 tons of coffee according to contracts since Vietnam started the 2023-2024 harvest. in October. This is equivalent to about 10% to 13% of the harvest.
The CEO of a leading export company in Dak Lak, said during a meeting in Ho Chi Minh City in early April: “It’s terrible, the price has exceeded what I could imagine” – He added. , several other companies and exporters lost money due to default but were still able to deliver coffee to global customers.
Also at the meeting organized by the Vietnam Coffee Association, Nestle said the company must find more coffee supplies from Brazil, Indonesia and India to maintain supply for its global factories. The country’s largest exporter – Intimex Group – said in April that Vietnam must import about 200,000 tons of coffee by 2023.
Data from the Vietnam Coffee-Cocoa Association (Vicofa) shows that in March alone, Vietnam exported more than 185,000 tons of coffee, creating an export value of 680 million USD. Although export volume decreased by 11.9%, value increased by 41% over the same period last year.
In March, the average export price reached 3,555 USD/ton, up 8% compared to February and up 55% over the same period last year.
In a coffee market report published late last year, the US Department of Agriculture estimated that world coffee reserves had dropped to their lowest level in the past 12 years.
In the 2022-2023 crop year, world coffee inventories decreased to 26.5 million 60kg bags, down 16.7% compared to the previous report and down 4% compared to estimates.
In 2024, many organizations and experts believe that coffee shortages will persist in the coming months for the following reasons:
- Major suppliers in Southeast Asia are experiencing a decline in output due to unfavorable weather conditions and low prices in recent years, forcing farmers to switch to other crops for higher profits.
- Robusta coffee production in Vietnam and Indonesia is forecast to decrease by 5.8 million bags this year.
- According to Vicofa, in the 2023-2024 crop year, Vietnam’s coffee output will decrease to 1.6-1.7 million tons, lower than the 1.78 million tons of the 2022-2023 crop year.
- According to the International Coffee Organization, global demand for Robusta coffee will continue to increase in 2024 and Vietnam will gain an advantage over Brazil in the next 6 months.
“Vietnam has an advantage, at least until the end of April, early May, when Indonesia and Brazil start harvesting. It can be said that Vietnam’s 2023-2024 coffee season has the best performance in history,” the source said.
Industry experts believe that with the current price situation, the coffee industry can reach a total export value of 5 billion USD by 2024. However, facing increasingly strict requirements from import markets, The domestic coffee industry needs solutions for sustainable development and traceability of origin, especially meeting EU anti-deforestation regulations.
In 2023, although export volume decreased by 9.6%, Vietnam’s total coffee export value still reached 4.2 billion USD, up 3.1% over the same period thanks to higher export prices.
According to the General Department of Vietnam Customs, coffee is ranked in the top 5 agricultural products with the highest export value in the past year.
From the end of 2023, global coffee prices will continue to increase due to concerns about lack of supply from major coffee producing countries. There are also concerns about supply delays as the Europe-Asia shipping route through the Suez Canal is disrupted due to geopolitical tensions.
Kinh Vu (giacaphe.com)
