Robusta Coffee Soars to Record as Drought in Vietnam Curbs Coffee Production

Coffee prices have been sharply higher for a second day, with arabica coffee posting a 3-1/2 month high and robusta posting a new record high. Concerns over excessive dryness in Vietnam are pushing robusta prices higher and providing carryover support to arabica coffee prices. Heavy rain in Brazil’s coffee-growing regions may have damaged coffee crops, with Minas Gerais receiving 75.4 mm of rainfall in the past week, which accounts for about 30% of Brazil’s arabica crop.

Tight robusta coffee supplies from Vietnam, the world’s largest producer of robusta coffee beans, are a major bullish price factor. Last Tuesday, Vietnam’s agriculture department projected that Vietnam’s coffee production in the 2023/24 crop year could drop by -20% to 1.472 MMT, the smallest crop in four years, due to drought. The Vietnam Coffee Association also said that Vietnam’s 2023/24 coffee exports could drop -20% y/y to 1.336 MM. Marex Group Plc forecasts a global 2024/25 robusta coffee deficit of -2.7 million bags due to reduced output in Vietnam.

A rebound in Vietnam’s coffee exports is bearish for robusta prices, as Vietnam’s Q1 coffee exports rose +8.3% y/y to 599,000 MT. Rabobank predicted a coffee surplus of 4.5 million bags for the upcoming 2024-25 marketing year, up sharply from the 500,000 bag surplus projected for 2023-24. On the bullish side, Rabobank reduced its 2023-24 production forecast by 3.9 million bags to 171.1 million bags, mainly because of downward revisions to production estimates for Indonesia and Honduras.

Coffee inventories have rebounded from historically low levels, with ICE-monitored robusta coffee inventories falling to a record low of 1,958 lots but recovering to a 10-1-4 month high of 604,079 bags. Larger coffee exports from Brazil are bearish for prices, with Cecafe reporting a 36.5% y/y increase in February arabica coffee exports to 2.806 million bags.

Read More @ Barchart

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