Coffee prices turn around, Arabica increases sharply, but will prices start to cool down?

Vietnam's General Statistics Office reported that coffee exports in July were estimated at 80,000 tons (about 1.33 million bags), down 32.1% from the previous month and down 6% from the same period last year.

World coffee prices recovered strongly on both exchanges, with Arabica coffee prices increasing sharply. The reason given for this recovery was that funds and speculators returned to the markets to increase purchases after aggressively liquidating net positions last week, in order to avoid the pressure of monetary interest rates that are being considered by central banks to adjust in an upward direction.

The market is also under pressure from new crop sales and existing supplies from the world's leading coffee producers and exporters.

Giá cà phê hôm nay 23/7: (Nguồn: YouTube)

Domestic coffee prices today, August 1, increased by 500 - 600 VND/kg in some key purchasing localities. (Source: YouTube)

Among them, the world's leading robusta producer - Vietnam - clearly shows the possibility of a short- and medium-term shortage. This has caused consumer markets to return to concerns about supply shortages, while the world's demand for robusta coffee is increasing.

In the Brazilian manufacturing hub, the real has strengthened on speculation that the Brazilian Monetary Policy Committee (Copom) is about to cut interest rates to attract foreign capital, ease pressure on the foreign exchange market and boost overall export sales. But a stronger local currency will make Brazilians more reluctant to sell in the hope of further price improvements as they have to earn less local currency.

At the end of the first trading session of the week (July 31), the price of robusta coffee on the ICE Futures Europe London exchange increased. The price of robusta coffee futures for September 2023 delivery increased by 33 USD, trading at 2,621 USD/ton. The price of November delivery increased by 39 USD, trading at 2,476 USD/ton. The average trading volume was low.

Arabica coffee prices on the ICE Futures US New York exchange increased sharply, with the September 2023 delivery term up 6.75 cents, trading at 164.65 cents/lb. Meanwhile, the December 2023 delivery term increased 6.35 cents, trading at 164.55 cents/lb. Trading volume was high.

Domestic coffee prices today, August 1, increased by 500 - 600 VND/kg in some key purchasing localities.

Average price	Change
USD/VND exchange rate	23,480	- 5
DAK LAK	66,700	+ 600
LAM DONG	66,100	+ 500
GIA LAI	66,600	+ 600
DAK NONG	66,900	+ 600

Unit: VND/kg.

(Source: Giacaphe.com)

The continued decline in interbank interest rates on futures contracts has attracted investors to return to the futures markets early. Wall Street observers said US stocks ended July with strong gains, signaling an optimistic period after months of uncertainty.

Global coffee prices will fall despite concerns about a temporary supply shortage due to Indonesia’s crop failure and Vietnam’s late-season phase. According to the Export Department, the reason is that hedge funds are cautious as Brazil has begun to show signs of increasing the amount of robusta delivered to the auction floor.

The Import-Export Department forecasts that the downward trend in coffee prices will continue in the coming time. Currently, Brazilians have sold about 32% of the total expected output of the 2023/2024 coffee crop, but it is still lower than the average level of the 2022-2023 crop.

According to experts, coffee prices are currently high and have fully reflected the shortage of goods in recent times. Robusta producing countries in Asia such as India and Indonesia have recorded a decrease in production of about 20%. Meanwhile, in Vietnam, there is almost no more goods. However, there has been a phenomenon of some roasters in the world using low-priced arabica or robusta from Brazil as a substitute, avoiding leading to an unacceptable increase in prices.

Source