1. Weekly News

Global

Global Coffee Prices Surge to Thirteen-Year High

According to the International Coffee Organization (ICO), global coffee prices rose 8.9% month-on-month (MoM) in Jun-24, reaching their highest level in thirteen years. The price surge is attributed to concerns over potential poor harvests in Vietnam and Indonesia during the 2024/25 marketing year (MY), coupled with a possibly lower-than-expected good harvest in Brazil. Specifically, the price of Colombian mild coffee has increased by 7.2% MoM, reaching USD 2.50 per pound (lb), while Brazil's natural coffee has risen 9.3% MoM, standing at USD 2.29/lb.

Brazil

Brazilian Coffee Secures USD 500 Million Export Deal with China's Luckin Coffee

A batch of coffee produced at Fazenda das Almas, located in Cape Verde, southern Minas Gerais, Brazil, has been included in a bilateral agreement to export Brazilian coffee to Luckin Coffee, China's largest coffee shop chain. The Brazilian Trade and Investment Promotion Agency (ApexBrasil) signed the USD 500 million transaction in Jun-24. The farmers aim to provide premium coffee beans to maintain a long-term partnership, ensuring sustainability, traceability, and food safety for their customers.

Rapid Progress in Brazilian Coffee Harvest Raises Concerns for 2024/25 Season

The Brazilian coffee harvest is processing quickly due to dry weather, raising concerns about a potential drop in production for the 2024/25 season. High temperatures and evaporation have caused varying degrees of losses across the country. The anticipated arrival of La Niña in the second half of 2024 adds further uncertainty. Consequently, coffee futures have experienced significant price volatility. The physical Brazilian Arabica market is paralyzed due to price discrepancies, though shipments and certificate requests are plentiful. The market closely monitors climate and economic developments that could impact coffee producers in Brazil and the global market.

Ethiopia

ECTA's Direct Market Linkage Boosts Ethiopian Coffee Trade

The Ethiopian Coffee and Tea Authority (ECTA) announced that the direct market linkage among coffee producers, suppliers, and exporters enhances the country's coffee export trade. Previously, producers and suppliers had to sell at prices set by intermediaries, often preventing fair compensation. This issue has been addressed through direct market linkage and facilitation, allowing for fair and reasonable trading. Eliminating brokers from the process has significantly improved the smooth flow of coffee marketing between producers, suppliers, and exporters, ensuring better outcomes for all stakeholders involved.

China

Rapid Growth and Development Potential in the Chinese Coffee Market

The Chinese coffee market is experiencing rapid growth with a significant annual per capita consumption increase, presenting vast development potential comparable to the European Union (EU) and the United States (US). As of May-24, China has over 229 thousand coffee-related companies. However, the new registrations declined by 22.1% year-on-year (YoY), indicating a shift toward market consolidation. Local experts anticipate continued growth in China’s coffee consumption driven by the spreading coffee culture, underscoring the necessity for companies to maintain quality and innovation to stay competitive.

2. Weekly Pricing

Weekly Coffee Pricing Important Exporters (USD/kg)

Yearly Change in Coffee Pricing Important Exporters (W27 2023 to W27 2024)

WoW

Brazil

In W27, Brazil's coffee prices increased significantly by 4.27% week-on-week (WoW) to USD 6.60 per kilogram (kg) amidst production uncertainties. Despite a YoY increase in production forecasts for 2024, dry weather raises concerns about potential production losses. Additionally, concerns over next year's production due to La Niña added to supply uncertainty. Consequently, global coffee futures surged in the New York and London exchanges during W27.

Columbia

Coffee price in Columbia increased by 2.82% WoW to USD 7.67/kg in W27. The price increase is driven by potential global supply shortage due to poor harvest in Indonesia and Vietnam. In contrast to Indonesia and Vietnam, Colombia's coffee production reached a three-years high to 5.82 million 60-kg bags in the first half of 2024. In addition, the country's coffee exports also increased 15% YoY during the same period.

Vietnam

The wholesale coffee prices in Vietnam decreased slightly by 0.21% WoW to USD 4.74/kg in W27 due to currency fluctuation. Vietnam’s coffee industry faces a potential supply shortage as the farmers deplete their inventory. Vietnam’s coffee export volume in the first half of 2024 fell by 10.6% YoY. However, the export revenue increased by 34.5% YoY to USD 3.2 billion due to surging prices. As the inventory goes down, the monthly export volume will keep falling until Nov-24 when the new 2024/25 harvest supply arrives.

3.Actionable Recommendations

Managing Coffee Price Surge and Supply Uncertainty

To address the recent surge in global coffee prices and potential supply disruptions, international coffee organizations and major coffee-producing countries should collaborate on strategies to stabilize the market. This includes enhancing weather resilience through improved agricultural practices and irrigation and climate-adaptive technologies investments. Furthermore, promoting diversified coffee sourcing from various regions can mitigate risks associated with localized production failures. Increasing transparency and data sharing among countries will help better anticipate and respond to market fluctuations.

Addressing Supply Shortages and Export Strategies

Vietnam should implement strategies to manage its coffee supply effectively, addressing the potential shortage due to depleted inventories. Encouraging farmers to adopt sustainable farming practices and improve yield efficiency will help stabilize production. Vietnam should also explore new markets and diversify its export portfolio to reduce dependency on a few major buyers. Additionally, supporting farmers with financial incentives and access to better farming inputs can enhance production and ensure a steady export supply.

Capitalizing on Coffee Market Growth

To capitalize on the rapid growth of the Chinese coffee market, companies should focus on maintaining high-quality standards and fostering innovation to stay competitive. Exploring partnerships with international coffee brands and leveraging local consumer insights can help tailor products to the Chinese market. Companies should also invest in marketing strategies that highlight the cultural aspects of coffee consumption, appealing to the growing coffee culture in China. Monitoring market trends and consumer preferences will enable businesses to adapt quickly and sustain growth.

Sources: Hellenic Shipping News, CanalRural, PEefeagro, All Africa, Foodmate