Following a consistent rise, coffee prices have plummeted abruptly. One factor behind this is that early season rains in coffee growing regions of Vietnam and Brazil have cooled down coffee prices.
According to Nguyen Quang Binh, a coffee market expert, the Robusta coffee price on the London market recently fell by more than 100 USD/ton compared to the closing price on May 1, down to 3,881 USD/ton on July futures contracts. On the same day, coffee also fell by 43 USD/ton compared to the previous trading day.
This means that compared to the peak price set on April 27 at over 4,400 USD/ton, this commodity has already lost more than 500 USD/ton. Binh commented that this is a “horrific drop” after a period of strong growth.
“I think that for this year’s coffee harvest, the opportunity to sell coffee at a high price on the market has passed,” Binh said.
Coffee prices plummet but remain high
Meanwhile, Trinh Duc Minh, Chairman of the Buon Ma Thuot Coffee Association (Dak Lak province), pointed out four factors that have caused the world coffee price to cool down.
Firstly, once the May futures contract expires and transitions to July, parties holding inventory often aggressively sell off, which leads to a decrease in prices.
Secondly, the Brazilian real (BRL) is depreciating against the USD, which has incentivized coffee exporters in the world’s number one coffee-producing country to export.
Thirdly, news of early season rains in coffee growing regions of Vietnam and Brazil has somewhat alleviated concerns about severe crop failures in the coming season.
Fourthly, the news that inventory on the market is higher than normal has reduced concerns about a coffee shortage.
Also according to the Chairman of the Buon Ma Thuot Coffee Association, coffee prices typically peak in April, when Vietnam is the only country in the world with available inventory to sell, yet the supply is limited. From May onwards, when Brazilian coffee begins to be harvested, and harvesting peaks in July, the coffee supply will not be as tight as before.
However, according to some organizations and individuals who follow the coffee and agricultural commodity markets in general, coffee prices may only be cooling temporarily. It is possible that coffee prices will reverse and increase again in the near future.
On the domestic market, coffee prices are currently around 128,000-130,000 VND/kg, which is about 5,000 VND/kg lower than the peak price.
