Global Сrop Сoncerns Still Drive Coffee Prices Sharply Higher

Defiant prices of Arabica and Robusta coffee soared to new all-time highs on Wednesday. On April 18, May arabica coffee (KCK24) closed up +11.20 (+4.73%), and May ICE Robusta coffee (RMK24) closed up +229 (+5.72%). Today, on April 19, most coffee contracts posted a moderate correction to the tune 0f 3…3.5%, but Open Interest (OI) remains uncharacteristically strong.

Brazil and Vietnam crop concerns keeppushing up coffee prices over the past month. According to Somar Meteorologia, Brazil's Minas Gerais region enjoyed just 15.8 millimeters of rain in the past week, or 74% of the historical average (Brazil's Arabica crop is primarily grown in Minas Gerais region). In contrast, concerns that excessive drought in Vietnam will limit its Robusta coffee production are, in their turn, pushing Robusta coffee prices to new record highs.

As Vietnam being the largest producer of Robusta coffee beans in the world, tight supplies are a major bullish factor for this blend’s prices. Due to drought, Vietnam's coffee production for 2023/24 is expected to decrease by 20% to 1,472 MMT (million metric tons), in that case posting the lowest crop in 4 years, which cannot go unnoticed going forward.

According to the most recent estimates, Vietnam's 2023/24 coffee exports may fall -20% YoY to 1,336 million metric tons. Thus, coffee trader Marex Group anticipates a global Robusta coffee deficit of -2.7 million bags in 2024/25 as a result of reduced production.