• Arabica coffee rose 4.5% on the week in New York, closing at US₵ 220.45/lb
• On the London exchange, Robusta coffee prices gained 4.7% to USD 3,852/t
• Cepea indicator for Arabica coffee rises 6.7% to BRL 1216.70/bag
• Cepea indicator for Robusta coffee up 4% to BRL 1073.43/bag
• Coffee differentials in Vietnam hover around + USD 1000/t for Grade 1 standard
• Possible escalation of conflict in the Middle East could promote risk aversion
• Supply shock in Asia remains the main bullish factor
• Indian exports of Robusta coffee up 18%
• Vietnam's weather remains the focus of agents' attention
• Brazilian exports up 37.8% in March
Over the past week, Arabica and Robusta coffee futures prices have once again moved up, supported mainly by the bullish fundamentals of the Robusta market, which has reflected the limited supply conditions in Asia and concerns about the potential for production next season in Vietnam. In London, Robusta prices renewed their historical high, closing Friday (12) quoted at USD 3852/t for the most active contract, an increase of USD 173/t (4.7%) on the week. In New York, Arabica coffee prices reached their highest level since October 2022, closing the week quoted at US₵ 220.45, up 945 points (4.5%) from the previous Friday.
On the Brazilian domestic market, coffee prices followed the trend abroad and ended the period higher. In addition, the 1% rise in the USDBRL pair to 5.12 contributed to a more intense rise in Arabica prices. According to the Cepea indicator, its prices rose 6.7% in the week to BRL 1216.70/bag. For Robusta, the indicator pointed to a 4% gain to BRL 1073.43/bag. Since the beginning of the month, Arabica coffee prices have accumulated gains of 18.2% while Robusta advanced 12.7% in the period.
In the coming weeks, in addition to the fundamental factors of the coffee market, it will be very important to follow the movements in the macroeconomic and exchange rate fields. The launch of Iran's attack on Israel has raised tensions over a possible escalation of the conflict in the Middle East, which could increase investors' feelings of risk aversion and boost the dollar. In addition, the US and the UK announced new sanctions against Russia in the base metals sector. In Monday's session (15), at the time of this writing, the USDBRL pair was already up 1.5% at 5.19 and the Dollar Index was up 0.19% at 106.21 points.
Weekly intraday (most active contract) - April 8 to April 12
As previously discussed in other editions of this report, the supply shock of Robusta coffee in Asia is the main factor behind the price increases in both London and New York. USDA data showed an 18% drop in production in Indonesia and reduced output also in Vietnam, with the US agency cutting its projection by 3.8 million bags in the report released in December, to just over 27 million bags for 2023/24. For the upcoming 2024/25 season, concerns about the weather and the return of the rains in the Asian country have raised doubts about the country's development and production potential.
In this context, price differentials for Robusta coffee have exploded in both Vietnam and Indonesia. For Vietnam, FOB differentials for Grade 1 coffee have exceeded and remained at the USD + 1000/t level for the last four weeks.
In addition, the outbreak of war in the Middle East is another factor that has had a major negative impact on coffee from Asia. While before the start of the war, freights from Asia were more competitive due to the Red Sea route, after the start of the conflict, attacks by the Yemeni Houthi group forced merchant ships to change their route towards Europe, bypassing the African continent. This scenario led to a sharp increase in logistical costs for coffees originating in Asia, mainly from Vietnam and Indonesia.
Also as a reflection of this scenario, Brazilian exports of Robusta coffee continue to be firm and with significant increases, as will be discussed below. However, in addition to Brazil, this scenario has favored Robusta exports from other producing countries. According to the Coffee Board of India, the country's exports rose by 13.3% in the first quarter of the year. For Robusta, there was an 18% increase in exports to 1.16 million bags. On the other hand, Arabica exports fell by 13.2%.
CoffeeNetwork recently published an article about conditions in Vietnam. As presented in the piece, prices have risen amid the limited supply of coffee in the country. Despite a 44% increase in Vietnamese exports during the first quarter of 2024, the Vietnam Coffee Association (VICOFA) projects a 20% drop in exports this year. Also according to the organization, production for the season is expected to end the period with losses of 20%, to 23.3 million bags, representing the country's lowest output in four years.
As already mentioned, the return of the wet season is essential for the proper development of production. According to local sources, some regions have received substantial amounts of rain, which has cooled conditions in these areas. However, these rains were not enough to reverse the dry and hot weather in the country. Despite the El Niño's transition to neutral, conditions may take a while to improve in the country. According to Vietnam's weather agency, new heatwaves are expected to hit the country between April and August. In addition, the extent of El Niño's effects could delay the return of rainfall in the country.
Brazilian exports up 37.8% in March
According to the Brazilian Coffee Exporters Council (Cecafé), Brazilian coffee exports totaled 4.29 million bags in March, representing an increase of 37.8% compared to March 2023. Also according to the organization, revenues totalled BRL 4.55 billion, an increase of 29.2% compared to the same period in 2023.
Brazilian coffee exports (million bags)
Source: Cecafé. Design: StoneX.
As has been the case in recent months, the highlight is the increase in exports of Robusta coffee. In March, Brazil exported 846,700 bags of the variety, representing an increase of 689.4%. Exports of Arabica coffee rose 15.1% to 3.1 million bags. Exports of processed coffee rose 9.3% to 341,200 bags.
Considering the crop year between June and March, Brazil exported 5.84 million bags of Robusta coffee (+495.2%), 26.48 million bags of Arabica (+10.3) and 2.65 million bags of processed coffee (-5.9%). The main destinations were the US, Germany, Belgium, Italy and Japan. In the first quarter, it is worth highlighting the increase in exports to Mexico, which rose 721% to 317,400 bags, and Belgium, which after falling in 2023, rose 186% in 2024 to almost 1.3 million bags.
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