When coffee prices dance

VietNamNet Bridge – The volatility of coffee prices in the world in the last few days has made a lot of Vietnamese coffee exporters suffer.

Prices fluctuating

On June 16, the coffee price on the London trading floor plunged by $69 per tonne, which made a lot of Vietnamese coffee exporters lose 1.2 million dong per every tonne of coffee sold.

In London, coffee prices for deals with delivery in July were as follows: $1,533 per tonne on June 12, then $1,525 per tonne on June 13, $1,515 per tonne on June 15, and then $1,446 per tonne on June 16. The price moved up again to $1,470 per tonne on June 17, and then went down to $1,441 per tonne on June 18. However, it then unexpectedly rose to $1,465 per tonne on June 19. Coffee prices have been described by experts as ‘dancing like stock prices’.

Exporters don’t have timely response to emergency

Vietnam has exported 680,000 tonnes of coffee so far this year at the average export price of $1,499 per tonne, reaping $1 billion in turnover. Though the export volume was an increase of 37 percent, export turnover decreased. In January 2009, the coffee price in London was $1,700 per tonne on average, while Vietnam’s export price was $1,550 per tonne FOB. However, the world’s price has decreased by $230 per tonne, while Vietnam’s export price has lost $140 per tonne.

The reason the world’s price has fluctuated over the last week is that speculators tried to corner the market. They deliberately stopped purchasing coffee for several days, which made coffee traders unable to predict the situation. On June 19, when roasters and wholesalers stayed outside transactions, fund investors unexpectedly collected coffee, thus making the coffee price increase again.

The price fluctuations have made Vietnamese exporters suffer because they collected coffee from farmers at high prices and then exported coffee when the world’s prices decreased unexpectedly. Exporters who signed export contracts on June 16, the day when the coffee price decreased the most sharply, said that they lost 1.2 million dong per tonne compared to the day before.

The Vietnam Coffee and Cocoa Association (Vicofa) has advised exporters to keep cautious when making deals. In order to minimise risks in signing contracts for the last six months of the year, exporters need to get updated information about the world’s market. If they see prices tending to increase, they should not be in a hurry to sign contracts; and if they see prices on the decrease, they need to try to fix prices soon.

The Ministry of Industry and Trade has also advised enterprises to try to sell coffee directly to consumers – coffee processing factories and people in foreign countries -- while they should try to limit intermediaries.

Great potential still can be seen

While robusta coffee in London has been decreasing in price, now hovering around $1,465 per tonne only, Arabica coffee is still believed will see its price recover in the coming days. On June 19, Arabica coffee with delivery in September in New York ICE increased by two cents, reaching $1.2285/lb after dropping to a 7-week deepest low of $1.2015/lb.

The US Department of Agriculture has reported the estimated coffee output of 127.4 million bags for the 2009-2010 crop, down by 7.3 million bags, or a 5 percent decrease from last year’s crop.

Vietnam’s coffee output is expected to decrease by 1.3 million bags to 18.4 million bags in 2009-2010 due to bad weather.

It is estimated that the world will see exports of 91.7 million bags in the 2009-2010 crop, down by 2.3 million bags from the previous crop. Therefore, the coffee supply this year is believed will be lower than the demand.

VietNamNet/TBKTVN