In recent times, the increasing trend of world coffee prices is the focus of attention of domestic and foreign investors. In just over half a year, the price of two main coffee products, Robusta and Arabica, has increased by more than 30%. In the past 10 days, Arabica coffee prices have increased a total of 16% to $ 3880/ton, Robusta coffee prices also increased by 4.2% to $ 1779/ton. Currently, Arabica prices are at their highest level in more than 5 years, while Robusta prices are at their peak from July 2018 to present.
Arabica coffee prices increased sharply due to concerns about supply
Compared with other commodities, the 30% increase of coffee is only lower than crude oil (40%), while significantly higher than agricultural products such as corn (20%), wheat (10%). %). This large increase is mainly due to concerns about the low production level of Brazil, the world’s No. 1 coffee exporter.
According to the latest weather forecasts, the state of Minas Gerais – the key coffee growing region of Brazil will suffer from widespread frosts and is also the main reason for the sharp increase in prices in the two sessions of July 20 and 21// last 07. Coffee is a very sensitive plant to cold weather, and according to agricultural experts, as long as the frost lasts for more than 2 hours, the later harvest will be severely damaged.
Since the beginning of this year, analysts have been anticipating a low production level of Brazilian Coffee because the crop is affected by the 2-year cycle of the coffee tree. This cycle will give 1 year of high output followed by 1 year of low output. According to the US Department of Agriculture (USDA), Brazil’s coffee production this year will drop by nearly 25% to 3.37 million tons.
Social distancing in Vietnam, Robusta coffee prices go up
Unlike Arabica Coffee, the recent Robusta price has been heavily influenced by information from Vietnam, the world’s No. 1 Robusta exporter.
Since the government applied social distancing measures throughout the southern provinces, due to the impact of the Covid-19 pandemic, domestic and foreign traders are extremely worried that the supply of coffee will be interrupted. paragraph. More difficult transportation, plus testing procedures at seaports, will delay the supply time to major import markets.
In addition, shipping rates to European countries have now increased by 5-6 times compared to the same period in 2020, due to a global shortage of containers. Previously, FOB delivery terms accounted for about 90% of Vietnam’s total coffee export volume, but now this figure has decreased to about 80%. Instead, many partners require the signing of orders under CPT and DAP delivery terms, with the common point being that the seller must bear all shipping and insurance costs. This is a difficult problem for exporters because if they accept to sell in this form, they will have to pay extra shipping charges.
Goods that cannot be exported are left behind at export ports with rudimentary storage conditions affecting quality. While the standard Robusta Coffee inventory on the ICE London Department continuously declined throughout June, causing the price of Coffee to be pushed up for near-term futures, far exceeding the long-term futures contracts (which is very rare). for commodity futures transactions).
Vietnam’s coffee export industry benefits?
In Vietnam, the selling prices of farmers in the Central Highlands and the South are still affected by the rise and fall of Robusta prices on ICE London. The price of green coffee beans is offered at around 35,700 – 36,600 VND/kg. Coffee export is still the key industry of the Central Highlands region, bringing in a turnover of 2.74 billion USD in 2020.
From the beginning of 2021 to the end of July 15, according to data of the General Department of Customs, Vietnam’s coffee exports have reached 900,235 tons, with a turnover of 1.65 billion USD. This is down 9% in volume and down 1.2% year-on-year. This shows that despite the increase in world prices, Vietnam’s coffee exports are still facing many difficulties.
According to the Vietnam Commodity Exchange (MXV), the coffee market will basically benefit from the decrease in global supply. However, the opportunities for domestic enterprises are no longer as clear as before, when many importers and companies dealing in roasted and ground coffee have had experience in dealing with the decrease in supply by increase reserves. In terms of demand, the Delta variant is making the Covid-19 pandemic more complicated in developing countries, and is also the largest coffee user in the world.
This will affect Vietnam’s coffee exports for the rest of 2021 and the domestic coffee industry is unlikely to benefit much, although world prices are likely to continue to rise higher in the near future. .
