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Will coffee prices start to go up in 2019?

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The domestic coffee price has dropped to the low level of VND33 million from the peak of VND53 million in 2011.

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The Robusta coffee prices in 2009-2019 (barchart.com)

 

At present, Dak Lak’s farmers, who have finished the harvesting of the last crop, are wavering between selling coffee beans right now or waiting for prices to rise.

Thoi bao Kinh Te Sai Gon reported that in the last 10 years, the coffee price record occurred in May 2011, when the price soared to $2.611 per ton. 

Meanwhile, the closing price of the London robusta exchange on January 22 was $1,516.

If compared with 2017-2018, the coffee price has lost by $766 per ton ($2,282 vs $1,516). From the peak in 2017, the price has been decreasing, once plummeting to a low of $1,468 per ton.

The sharp rise of coffee price in 2010-2011 prompted coffee planting countries to expand their cultivation areas and run re-cultivation programs, replacing old plants with high-yield disease-resistant plants.

Before running the re-cultivation program, the coffee output in Brazil was $40-45 million bags. In 2018-2019, the figure was 63 million bags. Similarly, Columbia has seen the output rising from 7 million bags to 14 million.

That is why the global coffee export volume in the last two years has surged from 118.5 million bags in 2017 to 123.5 million in 2018. This, plus the 2018-2019 bountiful crop in Brazil, has led to a huge supply.

The reports of Brazil and Vietnam, the two biggest coffee producers, showed that the former exported 31.52 million bags (+15 percent) and the latter 31.33 million (+ 20 percent).

Anticipating the coffee output rise, financial hedge funds on futures coffee trading floors have sold coffee beans in large quantities. The residual sale on New York Arabica Market once created a historic record with 2 million tons (October 17, 2018).

Experts said the futures coffee price not only bears the impact of the market supply & demand, but also the cash flow in the financial market, and the situation of the macro economy.

The US-China trade war which broke out in March 2018 pushed the prices of a series of farm produce down.

However, the latest events have shown signs of price increase. US Treasury Secretary Steven Mnuchin said the US may lower tariffs on some imports from China.

Financial investors and importers are not the only factors influencing market prices. The decisions of export countries, including Vietnam, will affect the market.

 

 

Source: VietNamNet

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