MILAN – Robusta coffee futures experienced a strong downward corrections on Friday, with London’s main contract for July delivery closing at $4,151, down a $153 (-3.55%) from Thursday’s all-time high of $4,304. This was still 1.7% higher from the previous week. Ice Arabica’s main contract for July delivery lost 3% on week, closing Friday at 224 cents.
Profit taking was sparked by a rebound in certified stocks. ICE-monitored Robusta coffee inventories on Thursday rose to a 4-3/4 month high of 3,760 lots, while ICE-monitored Arabica coffee inventories rose the same day to an 11-1/2 month high of 661,492 bags.
Meanwhile, Robusta domestic prices in Vietnam are hitting new records. The 120,000 dong/kg mark was crossed earlier last week and prices have been hovering around 130,000 dong in recent days.
Producers and traders expect further increases to 150,000 dong ($5.92) in the near future.
The strong pressures, exacerbated by speculation, threaten to disrupt the entire supply chain in the Asian country, causing serious damage to the entire global industry.
Farmers and middlemen have probably failed to deliver between 150,000 tons and 200,000 tons of contracted beans since Vietnam started the 2023-24 harvest in October, according to estimates from seven traders compiled by Bloomberg. That’s equivalent to about 10%-13% of the harvested crop.
The situation is aggravated by the current drought blamed on the El Niño phenomenon, which is likely to have a heavy impact on the next harvest as well, after two already rather disappointing crops.
Many lakes used to irrigate crops in the Central Highlands are critically low and underground water sources have been depleted, said Trinh Duc Minh, head of the Buon Ma Thuot Coffee Association in Dak Lak province, in an interview with Bloomberg. He forecasts the 2024-25 harvest from the province may be 15% lower than the estimated 520,000 tons collected in 2023-24 — which is down on the previous year.
“Buying interest from international roasters and tradehouses are still great but none seems willing to pay the current exorbitant prices,” Ho Chi Minh City-based Tuan Loc Commodities said in a note earlier this week.
“However, farmers and long middlemen are unfazed, having fewer coffee stocks to sell and being buoyed by recent gains,” it added.
The picture also remains complicated in India, with delays in the start of harvesting operations, which are cascading throughout the supply chain. Difficulties are also being experienced in Indonesia, where the harvest could be delayed until late May-early June.
In Lampung province on Sumatra island, traders offered Robusta beans at a $600 premiumto the May contract, up from $550 last week, amid concerns of delayed harvest.
