Robusta Farmer's Gate Pricing
Vietnamese Robusta Farmer’s Gate Price (FAQ) continued to be hammered to its lowest price since June 2020. This had led to a weekly slowdown in internal market transactions. Our sources indicate that the main factors driving such behaviours are likely:
one of seasonal nature – influenced by the willingness to sell of farmers as Tet comes near (refer to Graph A); and
one of negative pressure from the London Futures Market (refer to Graph B).
Thoughts on Market Trading Regime
We think that the current trading regime of Robusta London Futures may at large be influence by the robusta price differential between Brazil and Vietnam (refer to Graph C). From our vantage point, this can be understood as an arbitrage on both the currency trade of the Brazilian Real / Vietnam Dong and the pricing competitiveness of each country regarding Robusta.
Chart That Makes Us Go Hmmm... in Week V
On a macroeconomics pricing basis, we notice that the correlation between Robusta pricing both on a physical and futures basis had been disconnected from broad agriculture pricing (refer to Graph D). If this alligator jaws continue to persist, then the probability skews further towards a rally in Robusta price.
The Silver/Gold ratio, a prominent leading indicator of global fiat liquidity is also saying that Robusta needs to be priced higher (refer to Graph E).
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