Arabica follows robusta and advances above the 230-cent line for the Sept/24 contract on ICE US. However, it ended up erasing part of the gains and was unable to distance itself from this reference at the end of the trading session. The market remains very sensitive to the worsening perception surrounding the next robusta crop in Vietnam. This scenario justified the breaking of old resistances, with arabica flirting once again with the graphic top in early June, when it reached 238.70 cents. The harvest progress in Brazil partly helped to calm down the market and promoted corrections, causing arabica to close the trading session near 230 cents.
The president of the Vietnam Coffee and Cocoa Association (Vicofa) indicated that the combination of drought, heat waves, and the outbreak of cochineal (a pest) is expected to reduce the next robusta crop in Vietnam by 15% to 20%. Based on the robusta output estimate for 23/24, which is 26.7 mln bags (10% below the 29.7 mln bags in 22/23), Vietnam’s next crop should stay between 21.40 and 22.70 mln bags, according to Vicofa. This number is significantly lower than Volcafé’s preliminary projection of 24 mln and well below the USDA’s estimate of 27.85 mln bags. This scenario of lower production is naturally reflected in robusta prices in London and the attitude of Vietnamese growers, who are increasingly withdrawn.
Despite the good harvest progress in Brazil, due to the dry climate, the coffee supply remains below expectations, with growers remaining on the defensive. Furthermore, indications for Brazil’s conillon production are also disappointing, falling short of expectations. Both high dollar and international prices support this behavior. The arrival of winter in Brazil, which officially started this Thursday, is also a factor that explains this stance of sellers.
Coffee prices are rising despite the sharp growth in global shipments. Information from the ICO indicates that the world shipped 11% more coffee between October 2023 and April 2024, totaling 80.99 mln bags, compared to 72.88 mln in the same period of the previous season. Arabica coffee shipments rose by nearly 13%, with emphasis on those from Brazil, which increased by 21% in the period. These Brazilian shipments are supported by coffee remainders from the 2023 season. There were large remainders from the last season, which allowed growers to accelerate sales in the first months of 2023, taking advantage of the rise in prices. This strategy not only benefited growers, who became more capitalized, but also helped to reduce supply, explaining the behavior of Brazilian sales at the beginning of the new crop.