Production in South American countries began to pick up, but coffee prices remained high

Recently, the International Coffee Organization (ICO) released that the average price index of coffee in January 2024 was 1.76 US dollars/lb, and the price fluctuated between 1.71 US dollars and 1.85 US dollars in January, up 0.4% from December last year. But the Robusta price index hit a 30-year high of $1.48 a pound. The Robusta Coffee Price Index hit a record high as a result of the supply crisis, particularly in Robusta coffee-producing countries in the Asia-Pacific region. The Red Sea issue also has many implications.

In Vietnam, the expected price of local Central Highland coffee rose again to VND 77 million to VND 79 million per ton, and local traders said local coffee farmers were reluctant to sell their beans, hoping to sell at higher prices. In addition, many traders have signed pre-sale contracts with buyers, forcing them to buy coffee beans at a higher price, so coffee prices may exceed 80 million VND.

In Indonesia, affected by weather, earthquakes and volcanic activity recently, several volcanoes in Indonesia have erupted one after another, including Mount Merapi, one of the most active volcanoes in eastern Java, which has led to a decrease in coffee production, according to the Indonesian Geological Disaster Technology Research and Development Center.

In addition, the Red Sea problem continues. As Houthi armed groups attack ships passing through the Suez Canal, many shipping companies have begun to choose to stop operations and bypass the Cape of Good Hope in December. But as a result, transportation costs and time have increased significantly, container freight rates along the heavily affected Eurasian routes have risen by 150 per cent, and there will be delays of up to about three weeks due to re-routing. So many traders are buying less coffee in the Asia-Pacific region and spending less.

At present, only Brazil and Colombia, two countries with excellent recent production and export performance, have made Arabica coffee prices less volatile. In Brazil, although the weather forecast for recent weeks has been moderate, with reduced rainfall in some regions and drought conditions, Arabica coffee production is still on an upward trend, but there is a definite reduction in Robusta production and news that Brazilian producers are reluctant to sell Robusta beans, although Robusta coffee prices remain high.

in addition, coffee price in Colombia stabilized as a result of that recovery of the Colombia peso and the fall in fertilize prices. And improved weather conditions are expected to increase coffee production by about 3% for the 2023/24 crop year. In addition, many coffee-producing countries in South America said that the weather conditions are stable and the production will improve and increase. However, according to the International Coffee Organization (ICO), global coffee production will increase by 5.8% year-on-year to 178 million bags in 2023/24, but global coffee consumption will also increase by 2.2% to 177 million bags, leaving a surplus.