On January 16, 2025, global and domestic coffee prices surged, drawing attention from farmers, businesses, and investors. The main reasons for this increase stem from adverse weather conditions and a decrease in supply, creating opportunities but also posing significant risks, especially for investment and export strategies.
2.1. International Coffee Price Situation
Arabica Coffee Prices: Arabica coffee prices increased by 2.6% on the day, reaching 3.3045 USD per pound. This significant rise occurred amid concerns about a threatened global Arabica supply due to prolonged drought conditions in Brazil. As the world's largest Arabica exporter, Brazil’s reduced output has put substantial pressure on the market, pushing prices to record highs.
Robusta Coffee Prices: Robusta prices, which are predominantly produced in Vietnam, also rose by 1%, reaching 4,912 USD per ton. Similar to Arabica, Robusta production has been affected by unfavorable weather conditions. Both Vietnam and Brazil, the two largest producers, have experienced severe droughts during the growing season, leading to a decline in harvest output.
2.2. Domestic Coffee Price Situation
In Central Highlands and Southern Vietnam: The price of Robusta coffee beans in Vietnam fluctuated between 114,000 and 114,500 VND per kilogram, marking the highest level in several years. This is a positive signal for farmers, especially with the upcoming Lunar New Year, helping to increase income and reduce financial pressure.
Domestic Causes: Robusta production in Vietnam has been severely impacted by prolonged droughts and heavy rainfall during the harvest period. Additionally, rising import demand from major markets like Europe and the U.S. has further contributed to the increase in domestic coffee prices.
Risks to Consider
Despite the benefits of rising coffee prices, investors and businesses must consider several important risks:
Weather Changes: If weather conditions improve in major coffee-producing countries, coffee yields may recover, which could put downward pressure on prices.
Global Economy: Economic downturns or reduced consumption in major markets such as the U.S. and Europe could lower demand for coffee, affecting price trends.
Exchange Rate Fluctuations: As coffee prices are denominated in USD, exchange rate changes could significantly impact investment costs and profits in derivative markets.
Short-Term Forecast and Trading Strategy
Experts predict that coffee prices will remain high at least until the end of Q1 2025, as global supply is unlikely to recover in the short term. This presents an opportunity for investors to capitalize on the upward trend for short- to medium-term trading. However, closely monitoring weather factors and macroeconomic developments is essential to mitigate risks and make informed decisions.
This is a time marked by strong growth in global and domestic coffee prices, benefiting both farmers and investors. However, alongside the opportunity, there are potential risks related to weather, economic factors, and exchange rates. Staying informed and developing a suitable strategy will be key to optimizing profits in this volatile market environment.
