Robusta coffee prices fell sharply last week, inventories continued to decrease, is the price increase slowing down?

The International Coffee Organization (ICO) forecasts that in the 2022-2023 crop year, global Arabica coffee production is expected to increase by 4.6% to 98.6 million bags. Robusta production is expected to decrease by 2.1% to 72.7 million bags.

World coffee prices have been constantly reversing over the last few sessions of the week. Overall, the price of robusta coffee on the London exchange has had 4 sessions of decline and 1 session of increase in the middle of the week, the declines were very strong. Robusta coffee futures for September delivery decreased by a total of 128 USD to 2,544 USD/ton and futures for November delivery decreased by a total of 154 USD to 2,363 USD/ton. Trading volume was very high above average.

Meanwhile, the price of Arabica coffee traded on the New York market also had 1 session of increase and 4 consecutive sessions of decrease at the beginning of the week, the decrease was also very strong. The price of Arabica coffee futures for September delivery decreased by 10.35 cents to 147.45 cents/lb and the price of December delivery decreased by 7.70 cents to 150.00 cents/lb. Trading volume remained very high above average.

Robusta coffee inventories certified and monitored by the London Exchange, as of August 18, decreased by another 10,700 tons, or 21.69% compared to a week earlier, to a registered level of 38,640 tons (about 644,000 bags, 60 kg bags), with no recorded additions.

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Domestic coffee prices fell by 400-500 VND/kg in key purchasing localities in the trading session ending last week (August 19). (Source: doanhnhan.biz)

At the end of the trading session last weekend (August 18) on the international futures exchange, coffee prices continued to fluctuate on both exchanges. Robusta coffee prices on the ICE Futures Europe London exchange for September 2023 delivery decreased by 31 USD, trading at 2,544 USD/ton. November delivery decreased by 28 USD, trading at 2,363 USD/ton. Average trading volume.

The price of Arabica coffee on the ICE Futures US New York exchange for September 2023 delivery increased slightly by 0.45 cents, trading at 147.45 cents/lb. Meanwhile, the price of December 2023 delivery increased by 0.9 cents, trading at 150.0 cents/lb. Trading volume increased sharply in the December delivery period.

Domestic coffee prices decreased by 400 - 500 VND/kg in key purchasing localities in the trading session ending last week (August 19).

Average price	Change
USD/VND exchange rate	23,630	0
DAK LAK	64,300	- 400
LAM DONG	63,600	- 500
GIA LAI	63,700	- 500
DAK NONG	64,400	- 500

Unit: VND/kg.

(Source: Giacaphe.com)

The highlight of the past week was the sharp increase in the USDX index in the currency basket, making goods more expensive and reducing the purchasing power of goods in general, including coffee. Coffee funds and speculators have aggressively liquidated and transferred capital to other derivative markets such as crude oil and gold, due to more attractive profit margins.

Meanwhile, the selling pressure of the new crop coffee, which is currently in the final stages of harvesting in Brazil, combined with the expiration of the September futures option contract on both exchanges, forced funds and speculators to aggressively liquidate and balance their positions due to previous "overbuying".

The rise in coffee prices is expected to slow down in the near future even though there is no more supply. Because the current coffee price is high and reflects the shortage of goods in the past time.

The USDA estimates that Vietnam’s coffee output in the 2022-23 crop year will decrease by 6% compared to the previous crop year, to 29.7 million bags (60 kg/bag). The world’s largest robusta producer will have its lowest harvest in four years due to higher production costs (labor, fertilizer) and farmers tending to switch to more profitable crops such as avocado, durian and passion fruit.

In the first 9 months of the current crop year 2022-2023, our country's coffee exports reached a total of 1.44 million tons (about more than 24 million bags), with a turnover of 3.38 billion USD, up 2% in volume and 6.6% in turnover over the same period last crop year.

In the second quarter, coffee prices continuously set records, at times rising to 70,000 VND/kg. As of June 30, coffee prices began to cool down to 65,200 VND/kg, up 35% compared to the beginning of the quarter. Compared to the beginning of the year, this price increased sharply by 68%. This increase continued until July, reaching nearly 67,000 VND/kg.

We believe that the export volume from now until the end of the year may decrease by about 50% compared to the same period due to the gradual depletion of inventories, mainly in FDI exporters. We believe that the increase in coffee prices will slow down in the coming time even though there is no more goods. As mentioned, the current price is at a high level and has fully reflected the shortage of goods in the past time.

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