Robusta coffee prices on the Intercontinental Exchange (ICE) continued to rise to the highest level within 4 years due to increased demand in the world market while exports from Vietnam were interrupted due to Covid-19 causing the global supply is tight.
Robusta coffee for November term in the last session of the week (September 17) reached an all-time high record in the past 4 years, at $2,157/ton, ending the session slightly lower ($2,151/ton) but still 44 USD, or 2.1% higher than the previous session.
Arabica for December term traded on the New York Stock Exchange this session closed at $1,864/lb.
Prolonged frosts and droughts in Brazil have damaged much of the country’s coffee crops, sending prices soaring in the first half of 2021, to a seven-year high.
After a period of heating due to dry and icy weather in Brazil, the arabica market has calmed down, partly because the weather in Brazil has begun to rain, although not enough to quench the “thirst” of the farmers. Coffee has endured months of drought but also alleviated concerns about losses to the next crop’s output, in part because roasters have turned to increasingly using cheaper robusta to cut costs.
Bad weather also affected Colombia’s coffee harvest. In addition, the appearance of the “mu” variant of the Covid-19 virus in this country may lead to prolonged social distancing/blockade policies, plus a labor shortage may make the production situation worse. Colombian coffee exports will deteriorate further.
These factors contribute to the increase in robusta prices. Combined with that, the 4th Covid-19 epidemic broke out in Vietnam, especially in Ho Chi Minh City, causing interruptions in the transport of exported coffee, in the context of high transportation costs. Globally, the shortage of containers pushed up robusta prices.
World coffee price movement
Disruption to the flow of coffee from Southeast Asia and high coffee transport costs have reduced the amount of robusta coffee stored in the ICE warehouses as of September 16 to 131,270 tons, down from 141,330 tons a year. last month.
As the world’s second largest coffee exporter, Vietnam is struggling with the fourth Covid-19 outbreak, affecting coffee exports abroad.
In August, Vietnam’s coffee exports fell 8.7% from July to 111,697 tonnes, according to Customs data. In the first eight months of the year, coffee exports stood at 1.1 million tons, 6.4% lower than the same period last year. Although the volume decreased, the export turnover in 8 months still increased 2% to about 2 billion USD thanks to the high world coffee price this year.
Fewer coffee exports from Vietnam and a decline in output from other leading coffee producing countries have made coffee a “hot” commodity this year, with robusta prices up 52.2 % since the beginning of the year.
Meanwhile, “Demand for coffee, at least in Europe and the US, will increase in the coming months, as Covid-19 restrictions are lifted, allowing cafes to reopen.” again,” said Fitch Solutions.
This consulting firm has raised its forecast for the average price of arabica coffee in 2021 from 1.35 USD/lb to 1.6 USD/lb; The forecast for the average arabica price in 2022 is also raised from 1.25 USD/lb to 1.5 USD/lb.
Coffee market outlook
The anti-Covid-19 restrictions in Vietnam may be gradually lifted, the supply chain will be resumed. Fitch Solutions forecasts that the disruption to Vietnam’s coffee exports will only last for a short while. Meanwhile, Brazil’s coffee production is also expected to recover “quite quickly”, if there are no more extreme weather events.
Thus, the global coffee supply is likely to start to recover in the 2022/2023 crop. Fitch Solutions predicts the average arabica price in 2023 will drop to $1.20/lb.
According to the consulting firm: “Production support measures taken by governments in many parts of Asia and Latin America, including Colombia and Vietnam, are being implemented that will help production and export activities quickly return to normal”, “In addition, the growth in consumption demand in many major coffee consuming countries Key points in the world, such as the EU (27 countries) and Japan, seem to be peaking”, meaning that the “fever” in coffee prices will not last too long.
References: Cnbc, Refinitiv
