This week, world coffee prices recorded a week of strong growth and this increase is expected to continue.

On the morning of July 25, in Lam Dong, coffee prices were purchased at VND 36,800/kg, while in Dak Lak, Dak Nong, Gia Lai, Pleiku, and Kon Tum provinces, coffee was purchased at VND 37,500-37,600/kg.

At Ho Chi Minh City port, Robusta for export grade 2, with a 5% black and broken rate, increased to USD 1,954/ton (FOB), a difference of +55 USD/ton.

Previously, on July 23, on the London floor, Robusta coffee prices increased to the highest level in 3.5 years. On the New York floor, Arabica coffee prices increased by 17%, the highest level in 6.5 years.

COFFEE PRICES ARE HIGHEST IN 3 YEARS

According to the General Department of Customs, from the beginning of the year to July 15, the country's coffee exports reached 900,235 tons, worth 1.654 billion USD, down 8.63% in volume and 0.84% in value compared to the same period last year. In the first 6 months of 2021, coffee exports to most major markets decreased, except for China.

In June 2021, the average coffee export price reached 1,942 USD/ton. This is the highest level since May 2018, up 3.9% compared to May 2021 and up 13.9% compared to June 2020. In the first 6 months of 2021, the average export price of coffee reached 1,835 USD/ton, up 8.6% over the same period in 2020. In particular, the average export price of coffee to most major markets increased, except for China.

According to the Import-Export Department - Ministry of Industry and Trade, the domestic coffee market will basically benefit from the decline in global supply. However, the opportunity for domestic enterprises is no longer as clear as before, when many importers and roasted and ground coffee trading companies have experience in coping with the decline in supply by increasing reserves. In terms of demand, the Delta variant is making the Covid-19 pandemic more complicated in developing countries, which are also the largest coffee consumers in the world.

“The domestic coffee industry is unlikely to benefit much, although world prices may continue to increase in the coming time, as most of the price increases are to offset transportation costs. This shows that although world prices have increased, Vietnam's coffee exports are still facing many difficulties,” said the expert.

PRICE INCREASE IS PREDICTED TO NOT STOP

This week, world coffee prices recorded a week of strong growth. Specifically, the price of Robusta coffee in London for delivery in September 2021 increased by 132 USD/ton, and for delivery in November increased by 151 USD/ton; the price of Arabica coffee for delivery in September 2021 increased by 27.65 cents/lb, and for delivery in December 2021 increased by 33.85 cents/lb.

According to Reuter, the cause of the increase in coffee prices on the two New York and London exchanges comes from the two largest coffee suppliers in the world, Brazil and Vietnam, which are heating up the world coffee market, and the strong price increase is expected to not stop.

Accordingly, in Brazil, there is information about damage due to frost, the damage is likely to be up to 1-2 million bags. The unexpected frost in Brazil has caused such great damage that the lost output is twice as large as the amount of Arabica coffee stored in warehouses by ICE Futures U.S., the world's key coffee futures exchange. This quickly pushed world coffee prices to record highs.

A trader in Europe said the estimated damage in the next crop is 3 to 5 million bags, equivalent to 10% of the total crop output - it can increase, not decrease.

Meanwhile, in Vietnam, the Covid-19 epidemic is raging in major coffee growing and exporting regions, affecting supply. Meanwhile, inventory reports on the London Stock Exchange continuously show a decline, causing speculators to increase purchases, causing Robusta prices to continue to rise.

Agricultural experts say that Arabica coffee is a plant that is very sensitive to cold weather, and if the frost lasts more than 2 hours, the future harvest will be severely damaged. Information about the recent frost in Brazil shows that the damage is likely to be up to 1-2 million bags, causing the New York market to worry about a shortage of coffee supply from Brazil, with speculators competing to buy amid concerns about a decline in coffee output in 2022.

According to an analyst, the supply of Arabica coffee in the New York market has long come mainly from Brazil due to cheap shipping rates. If there is a shortage of supply, it may have to be compensated by Southeast Asian countries, when the shipping rates in this region are sky-high, which will push up the price very high. However, the above increase will be adjusted when the market has information about rains coming back to Brazil.

In the London market, Robusta coffee prices increased partly due to the benefit of Arabica prices, partly due to the European Central Bank (ECB)'s decision to keep key interest rates unchanged, along with economic stimulus policies in the context of the Delta variant causing a sharp increase in new cases in Europe. At this time, speculators see cash flow, not to mention the disruption of supply due to coffee-producing countries in Southeast Asia.