(HSV VIETNAM GROUP) – The record price increase of agricultural products such as cocoa and coffee may still have room to continue due to adverse weather conditions and expectations of increased demand.
Cocoa prices skyrocketed
In New York, cocoa futures prices surpassed $10,000 per ton for the first time recently, and have increased more than 120% this year.
Research firm Citi Research expects cocoa trading to stabilize between $9,000 and $10,000 per ton over the next three to four weeks.
Additionally, financial market risks in the second half of the year and the May-June period “could represent a turning point for the cocoa bull cycle,” Citi analysts said in a report.
Citi said cocoa grinding, derived from bean processing and a measure of demand, will be a key factor likely to determine whether cocoa prices rise further.
Difficult weather conditions and epidemics have affected production in West Africa, which supplies about 70% of the world's cocoa. The two largest cocoa producers, Ivory Coast and Ghana, have recently been affected by heavy rains, heat and disease.
Rabobank said dry conditions related to the El Nino weather phenomenon in much of Southeast Asia, India, Australia and parts of Africa have contributed to a rise in prices of commodities such as sugar, coffee and cocoa in recent months.
Cocoa is also grown in Vietnam with annual cocoa bean output reaching about 5,500 tons, while world output is about 4.8 million tons. Cocoa is grown interspersed with other crops such as cashews, coconuts, fruit trees, etc.
This is completely different from the specialized cultivation method in other major cocoa exporting countries in the world. In the Mekong Delta region, cocoa is grown mainly in a number of localities including Ben Tre, Tien Giang, Hau Giang, Vinh Long, Soc Trang, and Tra Vinh. In the Central Highlands, cocoa is grown mainly in Lam Dong, Dak Lak, and Dak Nong. In the Southeast, cocoa is grown mainly in Dong Nai, Binh Phuoc, and Ba Ria - Vung Tau.
Coffee prices increased unexpectedly
As for the outlook for coffee prices, Citi said prices could increase in both the short and medium term.
Arabica coffee futures for May delivery broke above key resistance at $2/pound on Wednesday (April 4) and hit a new high this year.
“The current move can largely be attributed to the heat wave in Vietnam affecting Robusta coffee production and as a result contributing to a shift to premium Arabica beans,” said Aakash Doshi, senior commodity strategist at Citi.
Citi said recent price movements have exceeded its short-term target of $1.85 per pound and that coffee prices may be about to enter a short-term rally to between $2.10 and $2.20 due to adverse weather conditions and continued financial capital inflows, among other market signals.
Citi expects Arabica coffee futures to trade between $1.88 and $2.15 per pound in calendar year 2024, but this could rise further if the market outlook tightens.
In Vietnam, domestic coffee prices were updated on the morning of April 5, 2024, continuing to maintain an increase compared to the previous trading session, an increase of about 1,100 - 1,300 VND/kg and still at a high level, over 100,000 VND/kg. Currently, the average purchase price in the Central Highlands provinces is 102,800 VND/kg, the highest purchase price in Dak Nong province is 103,000 VND/kg.
Rising coffee prices bring joy to farmers who are still storing coffee (with output estimated by experts at about 100,000 tons) but cause a lot of regret to farmers who sell early.
Vietnam is the second largest coffee exporter in the world, second only to Brazil. Vietnam is considered the country with the highest coffee yield in the world, with an average of 2.6 tons/ha of beans for Robusta and 1.4 tons of beans/ha for Arabica.
The Vietnam Coffee and Cocoa Association (VICOFA) predicts that 2024 will continue to have many advantages for coffee exports, and export turnover in 2024 could reach 4.5 - 5 billion USD. This will be the year reaching a new record for Vietnam's coffee export turnover.
Ha Diem HSV