Jul 12 / Laleska Moda

With low exports in Vietnam, LN approaches record levels

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  • Coffee contracts soared this week in LN, with the September contract approaching record high levels on Tuesday, at $4,634/Mt. While the prices had a correction on the following day, September remained above $4,500/Mt.

  • The main support for this movement is the perspective of tight supply in top robusta producer Vietnam, after export data from June showed a reduction of 11.5% from May, at 1.17 M bags.

  • The drop in exports only highlight the low availability of robusta beans, specially considering that there are still some months until the harvest of 24/25 in the Asian country starts, whit more significant volume of beans probably reaching the market only at the end of the year.

  • Perspectives of reduce supply of robusta are also giving support for arabica prices. In NY, arabica’s September contract also came close to its highest levels in nearly 2-1/2 years on Tuesday.

  • Recent fears of lower production levels in Brazil also add support to arabica prices. Even with strong export figures in June, there are still concerns over lower screen and yield effect on the Brazilian supply in 24/25.

With low exports in Vietnam, LN approaches record levels

Robusta prices soared this week in London: the September contract closed Tuesday at $4,634/mt, after approaching the record high levels of $ 4,681/mt. The bullish impulse came after the release of Vietnam export figures from June. Total shipments from the Asian country reached 1.17M bags of coffee last month, a decrease of 11.5% from May and down 53.2% from June/23.

The weak performance of exports also increase the perception of low stock levels in the top robusta producer, especially as the harvest of 24/25 season normally begins only between October and November, with a greater volume of Vietnamese beans expected to reach the market only at the end of 2024.

Besides that, there are still concerns over the effect of the dry and hot weather early this year on Vietnam total production in 24/25. This anticipated lower availability is already holding up sales and may lead to overall lower exports figures in the next months, with our models suggesting a decrease in exports in 23/24 in Vietnam, closer to 26 M bags.

Given this scenario, while there was an expected correction on prices on Wednesday, the contracts still ended up the week close above $4.500/mt, supported by as the perspectives of tight robusta supply in the coming months.

 NY Arabica (c/lb) and LN Robusta (USD/mt) (2nd Contract)

Source: Refinitiv

Exports - Vietnam ('000 bags)

Source: Refinitiv

TAs for the arabica, prices followed robusta movements, with the September contract testing the 250 c/lb level. On one side, the robusta deficit is pushing arabica consumption up. On the other side, there are still concerns over 24/25 harvest in Brazil, due to the reported lower screen and yield of both arabica and robusta crops since the start of the harvest. While there has been an improvement of screen size in some regions, production might still be lower than initially expected.

However, even a slightly decrease in the Brazilian production may lead to an even greater global deficit in 24/25 – our models already indicate a small global deficit in the season. So, its no surprise that, after the correction on Wednesday, prices rebounded, even after the released data on Brazil exports.

Total green coffee shipments ended June at 3.29 M bags, according to Cecafe, an increase of 43.8% from June/23 and a new record for the month, even with ongoing logistic problems. Arabica green exports were of 2.48 M bags, an increase of 20.3% yearly, while conilon exports reached 817.83K bags, 3.5 times higher than June/23 figures (or up 254.5%).

Conilon increased shipments is reflecting the increase in demand for the Brazilian beans amid decreasing exports from Vietnam and Indonesia and will probably remain above historical levels in the coming months, given the limited stocks in Southeast Asia.

Brazilian Exports - Arabica (M bags)

Source: Cecafe

Brazilian Exports - Conilon ('000 bags

Source: Cecafe

In Summary

The coffee market has been restless in the past few days, whit prices for both arabica and robusta highly volatile, and LN approaching record high levels. The main support continues to be lower supply levels of robusta, especially after the release data of decreasing exports from Vietnam, robusta top producer. Volume of Vietnamese beans should remain limited, at least until the end of the year, which could, in turn, continue to provide support for prices.

Arabica prices also tested previous highs, due increased demand amid robusta shortage and fears regarding Brazil 24/25 crop. Part of the market already believe that the production for both arabica and robusta might be lower than initially expected. Still, Brazilian export figures continues to be above historical average levels. With the harvest in the country approaching the end and higher prices, we might see strong shipments in the next months.



Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Victor Arduin
victor.arduin@hedgepointglobal.com
www.hedgepointglobal.com

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