Recently, arabica coffee bean futures prices have also risen following cocoa beans and food inflation, climbing to their highest point since October 2022. Arabica coffee bean futures for May delivery surged 12.5%, the largest weekly gain since July 2021, closing at USD 2.12 per pound.
In addition, according to a report published by the International Coffee Organization (ICO), the monthly average composite indicator price (I-CIP) stood at 186.36 US cents/lb, up 2.4% from February and reaching the highest level in nearly 18 months. Robusta also reached its highest level since October 1994, when the average price was 169.43 US cents/lb. The current price increase is due to a heatwave and drought hitting Vietnam, affecting robusta coffee bean output and creating a supply crisis, which has also indirectly pushed up arabica coffee prices.
Currently, according to the Vietnam Coffee and Cocoa Association, Vietnam's coffee growing regions are at the peak of drought and high temperatures. This year, local temperatures in Vietnam have risen by 1-3°C. In addition, Vietnam's coffee sector is facing water shortages and reduced arable land resources. Coffee output is forecast to fall 20% from 1.84 million metric tons the previous year, while exports will also drop 20% from 1.67 million metric tons in the same period last year.
As the market worries about persistent supply shortages in Vietnam, robusta coffee prices have hit a record high, with the May delivery price peaking at USD 3,849/metric ton, while the July forward contract price also reached USD 3,769/metric ton, very close to arabica prices. Local purchase prices in Vietnam are also holding at around VND 101 million to 104 million/metric ton. Output has fallen, and exports have fallen as well. According to statistics, exports of all forms of coffee from Asia and Oceania fell 17%, totaling 3.97 million bags.
Vietnam is the world's largest robusta coffee producer, and roasters around the world buy from it, especially European countries. Vietnam exports about 652,000 metric tons of coffee to the EU each year, ranking as the EU's second-largest coffee supplier.
According to data from the European Coffee Federation (ECF), from January to April, EU countries could only rely on Vietnam to import robusta coffee, because larger robusta-producing countries such as Brazil only begin their harvest in April, and coffee beans from the new season will not be available until May or June. In addition, La Niña is highly likely to occur in the second half of the year, which usually brings frost to Brazil and thus reduces output. But coffee demand is continually growing, providing a basis for coffee exports and room for prices to keep rising.
In addition, analysts believe geopolitical issues are also affecting coffee prices. Coffee is usually transported mostly by shipping.Recently, the tense situation in the Red Sea region has caused Brent crude oil prices to rise sharply. Brent crude oil is traded on the London Intercontinental Exchange and the New York Mercantile Exchange and is one of the benchmarks for market oil prices. Globally,65%more than [that share of] physical crude oil trades are priced against the Brent system. As oil prices rise, shipping costs also increase greatly, so coffee prices rise in tandem.
