MILAN – The Bull Run in the coffee markets continues: July ICE Robusta contract in London gained an additional $93 on Thursday, 30 May, closing at $4,131, its highest level since late April. After Wednesday’s partial setback, Ice Arabica also headed north. The benchmark contract added 355 points to settle at 233 cents, its highest level since 17th April.
London coffee futures continued to receive support from the limited supply of Vietnamese coffee. The world’s leading producer of Robusta coffee continues to cope with the abnormal weather conditions mainly attributed to the La Niña phenomenon, which brought a long dry spell.
Rain has finally arrived in the production areas, but it may be too little and too late to make up the large water deficit.
However, not all of the forecasts for Vietnam’s next harvest are negative. The new USDA Gain Report predicts a 2024/25 crop only slightly down on the previous year, with production seen at 29 million bags compared to 29.1 million estimated for 2023/24.
Robusta production will be 27.85 million, slightly below last year’s 28 million. Arabica production, on the other hand, will rise slightly to 1.15 million.
Post raised estimated MY2023/24 coffee production 6% to 29.1 million bags. Higher coffee prices in MY2023/24 caused farmers to increase investments in labour to reduce harvest loss as well as other inputs.
Post raised estimated MY2022/23 production to 28.3 million bags based on government production statistics, including 27.3 million bags of Robusta and 1 million bags of Arabica.
The increase was primarily due to higher estimated area. Instead of switching completely to another crop, coffee farmers now are adopting intercropping to diversify and increase revenue. Arabica production is stable as suitable land for Arabica production is limited in Vietnam.
Coffee exports reached 15.94 million bags in the first half of MY 2023/2024 according to customs data, a 7 percent decrease from MY 2022/2023.
Customs data shows a large drop in exports to major markets, such as Belgium (down 40 percent), United States (down 20%), and Germany (down 17%). However, exports to some other markets increased, including Spain (up 33%), Japan (up 28%), and Algeria (up 23%).
Post raised forecast MY2023/24 exports to 26.85 million bags (GBE) based on trade statistics and strong coffee prices. Vietnam businesses were able to expand exports in the last half of MY 2023/24 thanks to high export prices.
However, coffee businesses are facing potential difficulties in purchasing for future exports due to high domestic prices.
Some farmers are also retaining stocks in anticipation of further price increases. Coffee exporters are hesitant to sign future contracts for fear of being unable to balance domestic and export prices.
The Vietnam Coffee and Cocoa Association (VICOFA) predicted that the turnover of coffee export in CY 2024 will reach $5 billion USD. Post raised estimated MY 2022/23 coffee bean exports to 25.947 million bags based on Vietnam Customs data.
