Coffee futures brew as COVID outbreak curbs Vietnam deliveries
Updated
Robusta coffee prices surged on concerns that a fresh lockdown to combat COVID-19 in Vietnam and container shortages disrupted supply from the world’s second-largest coffee producer.
London Robusta coffee futures hit USD2,064 a tonne on Tuesday, 31 August, the highest for nearly four years, before settling 0.55% higher to USD2,023 per tonne.
Vietnam has imposed a strict stay-at-home order and deployed the army to support quarantine residents in Ho Chi Minh City, which is the hardest hit by the fresh surge in COVID-19 infections.
Coffee producing area in lockdown
The city in the south-eastern part of Vietnam is the country’s trading and economic centre as well as a major transportation hub. The lockdown means Vietnam's exporters, are struggling to transport goods, including coffee beans, to ports for shipment around the world, BBC reported. The bitter-taste robusta, which is used for instant coffee, accounts for more than 90% of Vietnam’s coffee output.
The Vietnam Coffee-Cocoa Association (Vicofa) and other trade organisations have called on the country's government to ease the restrictions to help avoid further delays to shipments and related costs. The Vicofa had not responded to Capital.com’s email seeking information on the coffee supply chain situation in the country at the time of writing.
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Brazil production shortfall
“London is having trouble sourcing coffee from Vietnam due to a shortage of containers to carry the coffee out of the country,” PRICE Future Group wrote in its 31 August daily soft commodities note.
Exports disruptions in Vietnam and production shortfalls in Brazil, also helped arabica coffee futures in ICE to rise towards USD1.9 per pound the highest since end-July, according to data from Tradingeconomics.
Brazil’s total coffee harvest this year is set to post its biggest yearly decline since 2003 after record harvest in 2020 and 2021 due to extreme weather conditions, it added.