Market speculation reverses the bearish trend in Robusta coffee prices

November 22, 2019

1 mins read

Robusta coffee prices, quoted on the London Intercontinental Exchange (ICE) have increased by 9% m-o-m, as at 21st November 2019. In the last week of October, prices were heavily supported by expectations of lower export volumes from Vietnam, following record-low prices. Furthermore, the recent rebound in the Brazilian real (compared to the US Dollar) provided additional support to coffee prices.  

From July to October 2019, global Robusta prices were weighed down by the ample supplies delivered by both South America (Brazil) and Vietnam. Global Robusta production increased by almost 7% in 2018/19, compared to 2017/18, resulting in abundant availability and a bearish price trend. Prices were also profoundly affected by the depreciation of the Brazilian real, boosting exports volume from South America. Robusta coffee on the ICE was trading at 55.66 US Cent/lbs in mid-October, the lowest since 2010. According to market participants, the record low prices are discouraging Vietnamese producers and traders from exporting on the global market, as farmers are struggling to cover their production costs.

During the eleven months of the 2018/19 marketing year (October-August), Vietnam’s export increased by 4% y-o-y, reflecting the increase in supply on the domestic market. As the 2019/20 marketing year just started, the low prices will possibly further discourage Vietnamese farmers from increasing coffee plantings  and they might also switch to more lucrative crops to gain better margins. Vietnam currently makes up 40% of the global Robusta supplies. Thus, a lower 2019/20 crop is likely to reverse the general bearish price trend, seen since 2016.

 

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Topics: Beverages
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