Weekly Coffee News: Asia Pacific

General News

There are 195 countries in the world today. Disregarding non-democratically ruled countries, 2024 is a massive election year. Major democracies in more than 64 countries will elect their new leadership. Major economies (and democracies) such as the USA, Europe, the UK, India, and Indonesia have already or will soon run to the polls. Never in human history before have so many people been able to vote and herewith directly influence the future of their nations. While the election campaign in the USA is running at full steam, Europeans gave their vote this weekend. France and Germany swung sharply to the right. In Germany, the biggest losers were the actual governing parties under the coalition of chancellor Olaf Scholz and the Greens. The Liberals somehow managed to stay alive with an almost unchanged result. It remains to be seen what impact this will have on the European level, the Green New Deal, and subsequent laws such as the EUDR.?

Politics and economics are always kind of interlinked - to say the least.?

Hence, it does not really come as a surprise that the European Central Bank has just adjusted interest rates from 4.0% to 3.75%. This is the first lowering since September 2019. Borrowing for European countries (and therefore also for business) is getting cheaper, and hopes are high that this will motivate growth. A pretty nice incentive right before the elections - a rouge who thinks evil ;-)

The US Federal Reserve, on the other hand, will most probably leave interest rates unchanged in the 5.25% to 5.50% corridor. But Jerome Powell and his team are accurately monitoring GDP growth (showing a deceleration), inflation (still a concern due to persistent price increases, especially in food categories), employment (reflecting a stable, strong labor market so far), consumer spending, trade deficit, and corporate profits. Quick interest rate cuts are not really expected.?

The Robusta coffee market remains a significant focus of concern due to its crucial role in global coffee blends. Vietnam's crop evolution is of vital nature in this equation. Current weather patterns, influenced by El Ni?o and developing La Ni?a conditions, raise questions about the impact of rainfall timing and amounts on the next harvest. Additionally, logistical challenges are exacerbating market worries. Shipping routes around Africa are experiencing delays as vessels navigate to avoid attacks in the Red Sea. Further adding to the uncertainty are the record low stock levels and the onset of the Brazil frost season. These factors collectively keep both markets on high alert, and volatility is the new constant.?

International coffee prices for Arabica had yet another moved week. With a trading range of almost 20 c/lb the month of July24 (KCN24) established a new 8 weeks high on Thursday at 239.80 c/lb. But after all the action a massive correction on Friday brought prices back to lower levels and the week closed 1.1% higher at 224.80 c/lb.?

The spot-month of Canephora (aka Robusta RMK24) established a new record high on Thursday at 4,528 USD/MT. This sounds almost like a broken record, but the development of the Robusta prices is genuinely unprecedented. To put it into perspective, Robusta's high on Thursday equals 205 c/lb. This is only a marginal 20 c/lb to 30 c/lb cheaper than international Arabica prices. The fair question is whether Robusta is leading the coffee pack, and the brief answer is yes: for at least several months now. The week closed 3.8% higher at 4,275 USD/MT.?

You can follow the weekly development of prices in the table below.

Indonesia

In Sumatra, heavy rains triggered a flash flood and cold lava flow from Mount Marapi, an active volcano in western Sumatra's Padang Highlands. The incident resulted in at least 37 fatalities and numerous injuries. Mount Marapi, approximately 2,800 meters high, has erupted 11 times in the past century.

For the 2024/2025 harvest, coffee production is expected to rebound, reaching approximately 11 million bags. This increase in production volumes is also expected to drive exports up from 4.3 million to 6 million bags. Additionally, significant growth in domestic consumption is projected, primarily attributed to stable economic expansion and the growing coffee market.

In general, climate conditions have been favorable across coffee regions. The fly crop has finished in Sumatra, and local trader's inventories are lowering. However, they also hold limited stocks with the expectation of higher prices.

The Canephora (Robusta) flow is also increasing. Strong demand is pushing higher differentials, and dry mills are busy processing all the coffee coming in.?

No significant news from the Port of Lampung.

India

After nearly two months of voting, Narendra Modi was sworn in as India's prime minister, making history by being elected for a third consecutive term. India, the world's largest democracy, saw billions of voters and over a million polling stations. Interestingly, the large numbers also apply to political aspirants: a record high of 744 political parties with diverse ideologies and proposals participated in the elections.

In India's capital Delhi, as well as in the northern and central regions, severe heat waves are causing extreme temperatures. Delhi reached a provisional record of 52.3°C. The capital has also reported its first death due to the record-breaking heat.

Amidst the heat, the Monsoon season has started in some parts of India, such as Kerala, on India's tropical Malabar Coast. As such, coffee monsooning operations are already taking off. The first shipments of monsooned coffees are expected to be ready around October.?

Anticipating higher prices, farmers hold on to their coffees and release only small quantities. The demand for Robusta, including lower grades, continues to be high.

There are no significant updates from the ports so far.

Vietnam

Vietnam's heatwave and lack of precipitation have been crucial factors affecting coffee prices. Nevertheless, in the last few weeks, much-needed rains have reached the Central Highlands in Dak Lak, Lam Dong, and Kontum. The capital city of Hanoi is still experiencing excessive heat, but luckily, rain is forecasted here in the next few days.

Despite the drought, Vietnam's coffee production for 2024/2025 is projected to remain stable, with a forecast of 29 million 60 kg bags.?

The country is currently between seasons, with both Robusta and Arabica harvests projected to start in October. Currently, the local market has been calm. Given the rising prices, farmers and traders are releasing little coffee into the market.

Apart from the persisting challenges at the Red Sea, there are no significant updates from the port.

Papua New Guinea

Rainfall continues to affect Papua New Guinea. Most recently, a landslide destroyed over 100 homes in the highlands of Enga, north of the island. Over 2,000 victims were reported. Recovery efforts are currently underway.

Amidst the tragedy and the logistical challenges brought by the rain, the harvest is progressing slowly. Rains are delaying cherry ripening, hindering collection, and slowing the delivery of parchments to dry mills. As a result, forecasts for crop size and quality remain uncertain at this stage.

No news from the port of Lae.