World coffee prices fell sharply at the end of the week, losing the upward momentum of the previous sessions. There was a divestment from coffee to switch to other commodities. In addition, the USD rose sharply back to the 101 mark, pushing coffee prices on the New York floor down.
In terms of supply and demand, the market still faces concerns of short- and medium-term supply shortages, along with new crop sales pressure from Brazil. The falling Real has caused a strong sell-off in the domestic market of this country.
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| Domestic coffee prices fell sharply by VND1,500/kg in some key purchasing localities in the trading session this weekend (July 29). (Source: Kitco) |
At the end of this week's trading session (July 28), robusta coffee prices on the ICE Futures Europe London exchange turned sharply down. Robusta coffee futures for September 2023 delivery fell by 85 USD, trading at 2,588 USD/ton. November delivery futures fell by 62 USD, trading at 2,437 USD/ton. Average trading volume was high.
Arabica coffee prices on the ICE Futures US New York exchange, September 2023 delivery period decreased by 3.55 cents, trading at 157.9 cents/lb. Meanwhile, December 2023 delivery period decreased by 3.5 cents, trading at 158.2 cents/lb. Trading volume is high on average.
Domestic coffee prices dropped sharply by VND1,500/kg in some key purchasing localities in this weekend's trading session (July 29).
Unit: VND/kg. (Source: Giacaphe.com) |
Despite high expectations, Vietnamese coffee exports in the third quarter are likely to slow down due to depleted supplies.
In the first nine months of the current crop year, Vietnam exported 1.44 million tons of coffee, while coffee output in the 2022-2023 crop year, according to estimates by the Vietnam Coffee and Cocoa Association (VICOFA), decreased by 10-15% compared to the previous crop year to 1.5-1.6 million tons.
Experts predict that the volume of exports from now until the end of the year may decrease by about 50% compared to the same period due to gradually depleting inventories, mainly in the hands of FDI exporters.
In the long term, for Vietnam to maintain its position as a coffee powerhouse, output needs to be maintained at 1.8 million tons. Over the past three years, the coffee area has been continuously reduced due to replacement by other fruit trees. Combined with the negative impact of climate change, which has caused coffee crop failure, output has decreased even further.
Recently, the US Department of Agriculture (USDA) forecasted that Vietnam's coffee output in the 2023-2024 crop year will increase by 1.6 million bags (5%) to 31.3 million bags due to favorable weather. The expected production area will remain unchanged with nearly 95% of the total output still being robusta coffee.
Rainfall is forecast to be 10-20% higher than average, supporting irrigation as well as coffee tree growth. Farmers are also gradually replanting coffee trees to increase yields.
However, Vietnam's green coffee exports are expected to fall by 1.5 million bags to 24.5 million bags based on low opening inventories and tighter import regulations from the European Union.
USDA forecasts Vietnam's 2023-2024 ending stocks to increase by 1 million bags from the previous crop to 2.7 million bags.
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