Coffee prices plunged at the end of the week; could a catalyst push prices higher in the short term?

Australian weather forecasters are predicting a 70% chance of an El Nino occurring. If the forecast is correct, many parts of the world will experience El Nino this year. This is the main catalyst that could push coffee prices significantly higher in the coming months.

World coffee prices fell sharply at the end of the week as the market worried about the upcoming decrease in demand for goods due to the tough stance of some major banks in the world recently. Robusta continued to be liquidated heavily on the London floor.

Arabica coffee prices fell for four consecutive sessions this week, reaching a 10-day low, also due to favorable weather forecasts in Brazil that have helped farmers continue harvesting coffee.

In the domestic market, coffee prices turned down by 1,200 VND/kg, the lowest transaction price in the localities was 64,600 VND/kg, recorded in Lam Dong province.

At the end of the trading session on June 23, the price of robusta coffee on the ICE Futures Europe London floor decreased sharply. The price of robusta coffee futures for delivery in July 2023 decreased by 54 USD, trading at 2,738 USD/ton. The price of delivery in September decreased by 73 USD, trading at 2,676 USD/ton. The average trading volume was high.

The New York Arabica Coffee Futures Exchange fell sharply, the price of Arabica coffee on the ICE Futures US New York for September 2023 delivery fell 5.4 cents, trading at 164.85 cents/lb. Meanwhile, the December 2023 delivery fell 5.2 cents, to 163.85 cents/lb. Trading volume increased sharply.

Giá cà phê hôm nay 24/6/2023: Giá cà phê lao dốc

Domestic coffee prices today, June 24, dropped sharply by 1,200 VND/kg in some key purchasing localities. (Source: YouTube)

ICE London-certified inventories as of June 22 fell by 2,810 tonnes, or 3.58%, from a week earlier to 75,590 tonnes. This information contributed to the increase in Robusta coffee prices.

Information from Brazil shows that the overall harvest progress is still higher than previous years thanks to favorable weather. In addition, according to Conab forecast, the total coffee output of Brazil this year will be about 54.92 million bags, 7.5% higher than the bumper crop of 2022. The above information puts downward pressure on Arabica coffee prices.

Domestic coffee prices today, June 24, dropped sharply by 1,200 VND/kg in some key purchasing localities.

Average price	Change
USD/VND exchange rate	23,320	+ 10
DAK LAK	65,100	- 1,200
LAM DONG	64,600	- 1,200
GIA LAI	64,800	- 1,200
DAK NONG	65,300	- 1,200

Unit: VND/kg.

(Source: Giacaphe.com)

Although the US Federal Reserve (Fed) postponed raising interest rates at its recent meeting, most of the agency's policymakers expect higher interest rates to be appropriate by the end of 2023.

According to technical analysis on the robusta market, technical indicators are showing that the downward momentum is still there. It is expected that in the short term, robusta coffee prices will fluctuate and accumulate within the range of 2720 - 2775. Robusta prices need to increase beyond 2770 and maintain above this price level to find an opportunity to increase and recover. However, it is necessary to pay attention to the price range of 2715 - 2720. If this price range is lost, robusta coffee can establish a downtrend.

According to technical analysis, the price of Arabica coffee yesterday recorded a decrease for the 4th consecutive session, technical indicators are showing that the downward momentum is still there. It is expected that in the short term, the price of Arabica coffee may continue to decrease to the support zone of 169 - 170. The downward trend may continue if the price of Arabica coffee falls below 169. On the contrary, Arabica coffee needs to overcome and maintain above the zone of 176.5 - 177 to have a chance to increase and recover.

In a report this week, Fitch said El Nino would affect some of the largest coffee-producing countries such as Indonesia and Vietnam. Vietnam is the second-largest coffee producer in the world, producing more than 1.5 million tons a year. Indonesia is the fourth-largest producer. Other major coffee-producing countries such as Brazil and Colombia would also be affected if the weather phenomenon occurs, according to Kalkine Media.

Coffee trading in the Vietnamese market has been stalled due to a continued shortage of robusta coffee, according to the Ministry of Industry and Trade’s Industry and Trade Information Center. Meanwhile, coffee prices in Indonesia, the world’s second-largest exporter, rose this week due to tight supplies and to offset a recent decline in London futures prices.

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