Jun 24 / Laleska Moda

With favorable weather, Vietnam 25/26 may see further recovery

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  • Precipitations in Vietnam, the world’s largest Robusta producer, are coming at the right time this year, helping to set flowers and fill beans for the 25/26 season. The forecast currently remains for more intense rainfall in major producing regions, like the Central Highlands.

  • While too much rain could also negatively affect the crops, for now, no harm has been recorded with a likely positive effect on yields. According to NOAA the probability is also for an ENSO-neutral state in the rest of 2025. A neutral ENSO has a positive correlation with higher rainfall in Vietnam, which could be an indicator of a more favorable development for the 25/26 season in the country.

  • With this in mind, we have also revised our numbers for the season. The expectation is of an increase of 8.3% in production in 25/26 over the 24/25 cycle, to 29.4 M bags. This could also allow an increase in exports and a higher availability of Robusta in 25/26.

  • This positive scenario, alongside the good harvest rate of the 25/26 season of Conilon in Brazil – also a higher crop – continues to put downward pressure on future prices, with the July contract in London near a one-year low on Friday.

With favorable weather, Vietnam 25/26 may see further recovery

After a smaller 23/24 and 24/25 season, Vietnam could be heading to a recovery in the 25/26 cycle. Not only did producers takeadvantage of higher prices in 2023 and 2024 to invest in their coffee plantations and new areas, but the current weather outlook has also been aiding the development of this next season. In December 2024, rains have helped improve coffee trees’ health, despite the delays in the harvest of the 24/25 season. Meanwhile, after the flowering of the 25/26 crop at the end of April, precipitation level has increased, with cumulative figures remaining above-average in both May and June.

The forecast for the next 14 days is also for above verage rainfall in the Central Highlands regions, where the Robusta’s trees are. While excessive rains could cause some losses in the coffee fields, for now, no harm has been recorded, with current precipitation levels helping both the setting of flowers and the filling of beans.

Vietnam: Cumulative Precipitation in Central Highlands (mm)

Source: Gadas/CPC

Precipitation Anomaly Forecast – European Model – 14 Days (mm)

Source: World Ag Weather

According to NOAA data, there is a higher probability of 2025 remaining with an ENSO-neutral state (no La Niña or El Niño). A neutral ENSO has a positive correlation with higher rainfall in Vietnam, which could be an indicator of a more favorable development for the 25/26 season in the country, especially regarding yields.


Keeping this in mind, we have increased our production estimates for Vietnam from 27.9 M bags to 29.4 M bags for the 25/26 season, which is an 8.3% increase compared to the 24/25 cycle. In this scenario, the country could increase its export figures and supply beans for its growing internal market, even with low carryover stocks.

In contrast, trade in the country has been rather dull lately, especially after differentials fell sharply with the harvest in Indonesia and Brazil, leading us to lower our expectation for total exports in 24/25. However, as the 25/26 season approaches in Vietnam, farmers may return to the market to sell remaining beans to finance the harvest and free up storage space for new coffee, which could still lead to higher figures than 23/24.

Current arbitrage levels also favor an increase in global Robusta consumption and a decrease in Arabica, which could also favor the trade in Vietnam in the coming months. In this regard, it is expected an increase in global consumption of Robusta in 25/26 – in 24/25 we projected a decrease mainly due to the reduction in Conilon consumption in Brazil. With this increase, Robusta global balance could still face a new deficit in 25/26, despite the larger production in the cycle. However, in the short-term prices are still expected to face downward pressure, especially the July contract, given the current harvest in Brazil and Indonesia and the positive perspectives regarding Vietnam 25/26 season.


IRI Model – ENSO Probability Forecast in 25/26

Source: NOAA, Columbia University 

Vietnam: Supply and Demand (M bags)

Source: Hedgepoint

Robusta Supply and Demand (M bags) 

Source: Hedgepoint

In Summary

The current weather conditions are favorable for the development of the 25/26 season in Vietnam, the world's largest Robusta producer. Higher precipitation levels since May, coupled with the forecast of neutral ENSO conditions for the remainder of 2025, could result in increased yields in Vietnam. Our current production estimate is 29.4 million bags, an 8.3% increase from the 24/25 season. This larger supply could lead to increased exports from the Asian country in 25/26, especially since global demand is shifting towards Robusta due to current arbitrage levels with Arabica.

Overall, the anticipated increase in demand could result in another Robusta deficit in 25/26, despite the expected higher supply. In the short term, however, the favorable conditions in Vietnam, coupled with the harvest of a larger crop in Brazil and Indonesia, are expected to put downward pressure on near-term contracts.

Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Lívea Coda
livea.coda@hedgepointglobal.com
www.hedgepointglobal.com

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