Domestic coffee prices
On October 30, coffee prices in key Central Highlands regions increased by VND800/kg, bringing the average price in the whole region to VND116,500/kg.
The increase occurred throughout the region: Lam Dong and Dak Nong (old) both increased by 900 VND/kg, Gia Lai increased by 800 VND/kg, and Dak Lak increased by 700 VND/kg.
World coffee prices
The international coffee market witnessed an explosive price increase. Robusta ( London) skyrocketed by 145 USD/ton (up 3.25%), closing at 4,610 USD/ton (term in January-June).
Arabica (New York) also increased, by 2.80 US cents/lb (+0.72%), closing at 390.70 US cents/lb.
The consensus on price increases, especially Robusta's breakthrough, has created great momentum for domestic prices.
Assessment and forecast
Today's explosive price increase shows that the market is returning to focus on the most important factor at the moment: the shortage of actual goods due to deeply decreased inventories.
The main reason for the increase is that the amount of coffee in stock on international exchanges continues to fall to a new bottom. Arabica inventories have hit a 1.5-year low, while Robusta inventories have also hit a 3.25-month low. This situation is a direct result of the US imposing a 50% tax on Brazilian coffee, causing US importers to cancel contracts and tighten supply.
Factors that should have dragged prices down were ignored by the market in this session. Despite forecasts for rain in Brazil this week (which help ease concerns about drought) and hopes for the US-Brazil to lift tariffs soon, concerns about shortages of inventories are growing. Pressure from Vietnam's abundant supply of Robusta (the crop is forecast to increase by 6-10%) has also been temporarily overwhelmed.
The short-term trend forecast has turned very positive. Today's strong rally could be the start of a new recovery, heading towards higher prices. As long as inventories remain at a record low and the tariff problem has not been resolved, coffee prices will continue to be strongly supported. However, the market will still be very sensitive to news about US-Brazil trade negotiations and actual rains in Brazil.
