The drought continues! In the future, Robusta will have a supply gap of 2.7 million bags

Recently, global coffee prices have plummeted as weather improves in many countries, exports increase and international inventories rebound.

In April, due to the drought in Vietnam, Vietnam lacked water resources. The main coffee producing areas were severely affected by high temperatures. Coffee trees also withered, resulting in a decline in production, tight supply, and Robusta coffee prices climbed to a 45-year high in April.

Then, in early May, Brazil and Vietnam, the two largest coffee producing countries, released April coffee export reports. In the report, Brazil and Vietnam increased in both production and export volume. Coffee stocks released by the Intercontinental Exchange (ICE) have returned to normal levels. In addition, coupled with the arrival of local rainfall in Vietnam, coffee prices began to fall.

However, in recent days, coffee prices have rebounded slightly and are on an upward trend.

Recently, according to the chairman of the Buon Ma Thuot Coffee Association in Thue Province of Vietnam, although rain has begun to rain in the central highlands, alleviating the drought, the current rainfall is unevenly distributed and the total amount is still insufficient. It cannot meet the needs of coffee plants during the fruit forming period.

It also pointed out that about 40% of coffee trees in Dol Lok Province, which accounts for one-third of Vietnam's total coffee production, still do not receive enough water. In the past, Dol Province had an average rainfall of 200 mm in May, but the current rainfall is only 20-30 mm, and the current rainfall is 50% less than the same period last year.

Although rain can alleviate the drought in the past two months, the rainfall is not enough to solve the problem. The Vietnam Coffee and Cocoa Association still expects coffee production to drop by 20%, reaching a low of 1.472 million tons in the past four years, which also makes Vietnam's current domestic coffee prices have rebounded to 100 million VND/ton.

In addition, central Brazil is also affected by drought. Minas Gerais, Brazil's largest coffee producing area, has been affected by El Niño and has not rained for three consecutive weeks, and the meteorological platform predicts that there will be no rain throughout the next May.

According to data from local Brazilian institutions, as the price increase in April accelerated sales in the spot coffee market, 94% of the coffee production in 2023/24 has been sold, which is higher than the sales progress in the same period last year. But now, with low caffeine supply in Robusta and uncertainty about the new production season, sales have begun to slow down.

Regarding the current weather conditions and supply constraints and other issues, global financial services platform Marex Group Plc predicts that due to reduced production in Brazil, Vietnam and Indonesia, there will be a supply gap of 2.7 million bags in the global Robusta coffee market next year, and future prices may rise.