July Arabica coffee traded on Thursday closed down 9.70 and Robusta coffee closed down $298 at $3,680/ton. This was the worst coffee trading session in history for Robusta coffee, with the lowest drop of $358 during the session.
Coffee prices on Thursday were sold off so strongly that they pushed prices to the lowest level in 3 weeks. A rebound in coffee supplies in the ICE market has eased supply concerns and prompted liquidation of long positions, after ICE-monitored Arabica coffee inventories rose to a one-year high on Friday. Year and Robusta coffee inventories rose to a five-month high on Wednesday
Inventories of certified graded Arabica coffee held on the New York coffee market reportedly increased by 7,618 bags yesterday, bringing the inventory to 667,376 bags.
The price difference between the London and New York markets widened yesterday to 39 cents/pound if both markets were converted to cents/pound, with this level showing that Robusta is losing gradually gaining value compared to last week. Please note that, during the period when the two types of coffee traded normally before the current market fluctuations, the value difference between the two types of coffee was usually in the range of 90-91 cents, with the lower part belonging to Robusta.
In the current situation, the US Federal Reserve is still keeping interest rates stable with no changes. The US Dollar and Brazilian Real currency pair is holding at a normal level of 5,194 Reals
In recent times, there have been many speculations that coffee prices are at risk of plummeting after increasing too much for a long time, surpassing all assessments of experts and businessmen.
In a Reuters poll in March 2024, at a time when prices were very hot, this famous newspaper interviewed 10 traders and analysts and obtained the majority of forecasts that prices were Arabica coffee is expected to end 2024 around 165 cents/pound, which if true would mean the price of the staple coffee would drop about 9% compared to the end of 2023.
Robusta coffee prices are also expected to end 2024 in the range of 2,600 USD/ton, 14% lower than the price at the end of last year.
Poll participants at the time believed coffee prices would come under pressure in April-May due to a more favorable supply outlook.
Forecasting prices from now until the end of 2024 is still a bit early because there will be many fluctuations in weather, as well as supply from producing countries, we will still have to wait, however, the comments of the Analysts as well as leading traders will affect the current price, because the next action is usually to sell futures right now and that easily affects the price of coffee.
The reason that poll participants expect is that coffee production in leading grower Brazil will increase to 69.5 million bags in 2024/25 from 66.1 million bags in 2023/24 and is expected to increase to 69.5 million bags in 2024/25. Expect output in Vietnam, the world’s second largest producer and the leading grower of Robusta coffee, to increase by 1.5 million bags to 29.5 million bags in 2024/25. However, one thing that the respondents did not know at the time of the survey is that Vietnam then and now has experienced an extremely harsh drought, in which many farmers expect their output to be reduced. Loss is immeasurable.
Three analysts polled by Reuters said the main factor in the market will be the change in climate patterns, from the current El Nino to a possible La Nina in the second half of the year.
El Nino is generally considered more negative for coffee production because it tends to lead to drier weather for Robusta growing regions in Asia and a warmer-than-average climate in Brazil. A shift to La Nina could bring more favorable weather for coffee plants.
Kinh Vu (giacaphe.com)
