In W44 in the coffee landscape, The World Bank's Commodity Markets Outlook predicts that the global coffee market will undergo significant changes in the upcoming year. The report forecasts a decline in Arabica and Robusta coffee prices in 2024 due to the high supply from key producers such as Brazil, Vietnam, and Colombia. Arabica coffee prices have seen a significant drop of 14% in the third quarter of 2023. The current prices are about 30% lower than those in 2022. This trend is expected to continue into 2024 as Brazil and Colombia ramp up their production, which is expected to increase by approximately 14%, accounting for 60% of the global Arabica output.
Conversely, the Robusta coffee prices have slightly increased by 2% during the September quarter and are over 17% higher than last year. Although the Robusta market is projected to remain tight due to reduced production in Indonesia and Uganda, Vietnam's increased output could ease this tightness. Several other factors may also influence price trends, including the El Niño weather conditions and potential global economic downturn.
Arabica coffee beans stocked at the Intercontinental Exchange (ICE) certificate houses reached a 24-year low of 380,033 60-kilogram (kg) bags on November 1, 2023. According to ICE's daily report on Wednesday, November 1, the certified stocks have decreased by 9,105 bags. Additionally, no pending coffee deliveries are currently awaiting approval for entry into the certified stocks due to the grading process. The exchange's low stock volume often suggests that the physical market values the commodity at prices higher than it is on the exchange. This implies that traders have no reason to deliver coffee upon the expiration of ICE's Arabica futures as there are no financial benefits.
The most recent report by the United States Department of Agriculture (USDA) Foreign Agricultural Service (FAS) suggests that coffee production in Colombia is expected to increase by approximately 2.7% in the 2023/24 marketing year (MY) due to improved weather conditions. However, the report also highlights long-term threats to Colombian coffee production, including higher fertilizer costs, limited access to bio-based fertilizers at scale, and aging coffee trees. After a period of excessive rains and extended cloud cover due to the recent La Niña phenomenon, production in Colombia is expected to bounce back in MY 2023/24 to approximately 11.6 million 60-kg bags. According to Fedecafe, Colombia's coffee growers association, the area planted with coffee trees younger than 24 months old was 130,000 hectares (ha) at the end of 2022. This is 40,000 ha short of Fedecafe's target. Fedecafe has been encouraging producers to rejuvenate their coffee plants through campaigns to avoid impacting productivity and profitability in the medium and long term.
