Coffee Prices Spike Again Amidst Weakened Dollar And Delayed Harvest In Vietnam – CoffeeTalk

On Dec 6, 2024

Coffee prices have seen a sharp rally on Thursday, recovering more of this week’s losses. The weakness in the dollar on Thursday spurred some short-covering in coffee futures, while Robusta coffee has support due to supply concerns, as heavy rain in Vietnam is delaying the coffee harvest. On Tuesday, arabica coffee fell to a 2-week low, and robusta dropped to a 3-week low on long liquidation pressures spurred on after J. Ganes Consulting said that keeping a large amount of capital tied into a position in coffee may no longer be justified after ICE raised its margins for holding positions in coffee futures last week. A bearish factor for robusta coffee was the action taken by the Vietnam Coffee and Cocoa Association on Tuesday to raise its 2024/25 Vietnam coffee production estimate to 28 million bags from an October estimate of 27 million bags.

Weakness in the Brazilian real (^USDBRL) is also bearish for coffee, with the real just above last Friday’s record low against the dollar. The weaker real encourages export selling from Brazil’s coffee producers. Last Friday, March arabica posted a contract high, and nearest-futures (Z24) arabica posted a 47-year high. Meanwhile, January robusta coffee posted a 2-1/2 month high.

The impact of dry El Nino weather earlier this year may lead to longer-term coffee crop damage in South and Central America. Rainfall in Brazil has consistently been below average since April, damaging coffee trees during the all-important flowering stage and reducing the prospects for Brazil’s 2025/26 arabica coffee crop. Brazil has been facing the driest weather since 1981, according to the natural disaster monitoring center Cemaden.

Robusta coffee prices are underpinned by reduced robusta production. Due to drought, Vietnam’s coffee production in the 2023/24 crop year dropped by -20% to 1.472 MMT, the smallest crop in four years. The USDA FAS projected that Vietnam’s robusta coffee production in the new marketing year of 2024/25 will dip slightly to 27.9 million bags from 28 million bags in the 2023/24 season. Tight robusta supplies are supportive for robusta prices, as Vietnam’s General Department of Customs reported that Vietnam’s October coffee exports fell -11.6% m/m to 45,412 MT and Vietnam’s Jan-Oct coffee exports fell -11.1% y/y to 1.15 MMT.

Brazilian coffee export news has been bearish, with Brazil’s Oct green coffee exports rising +11% y/y to 4.57 million bags and 2023/24 coffee exports rising +33% y/y to a record 47.3 million bags. The International Coffee Organization (ICO) recently projected that 2023/24 global coffee production would climb +5.8% y/y to a record 178 million bags due to an exceptional off-biennial crop year.