W8 Coffee Update: Global Coffee Prices Fall on Speculation, China's Rising Influence and Long-Term Potential

Published 2024년 3월 1일

In W8 in the coffee landscape, global coffee prices experienced a notable decline on Feb-24, attributed to speculative selling and optimistic production forecasts. Robusta coffee futures on ICE Europe dropped by USD 22/mt, while Arabica coffee futures on ICE US decreased by USD 0.017/lb. Market speculation surrounding the end of delivery terms and improved weather conditions in Brazil's Minas Gerais region contributed to the downward trend. Additionally, Vietnam's increased coffee exports, up 67.45% YoY, added to the global supply, further driving prices down. Meanwhile, China is emerging as a potential long-term coffee importer despite its currently low consumption rates. Although China remains the sixth largest importer of Brazilian coffee, its per capita consumption is significantly lower than the global average, primarily due to cultural preferences for tea. Nonetheless, with a growing interest in coffee consumption and an annual growth rate of 12%, China could potentially become a major coffee consumer in the future.

Global Coffee Prices Decline Amid Speculative Selling and Positive Production Forecasts

Global coffee prices on both ICE Futures Europe and ICE Futures United States (US) exchanges significantly declined on February 23, 2024. Robusta coffee futures on ICE Europe (Mar-24 delivery) fell by 22 USD per metric ton (mt) to USD 3,152/mt, while May-24 delivery futures decreased by USD 28/mt to USD 3,085/mt. Similarly, Arabica coffee futures on ICE US (May-24 delivery) dropped by USD 0.017 per pound (lb) to USD 1.815/lb, and July-24 delivery futures declined by USD 0.016 /lb to USD 1.805/lb.

Market speculation regarding the end of the Mar-24 delivery term on both exchanges pushed investors to liquidate their positions, contributing to the price drop. Recent above-average rainfall in Brazil's Minas Gerais region, a key coffee-producing area, has alleviated concerns about drought impacting the upcoming harvest. This positive outlook has dampened prices. Vietnam's coffee exports in Jan-24 surged by 67.45% year-over-year (YoY), increasing global supply and putting downward pressure on prices. Vietnamese coffee prices in the Central Highlands provinces also decreased by USD 0.041 per kilogram (kg), with buying prices ranging from USD 3.32/kg to USD 3.36/kg.

China Emerging as a Potential Long-Term Coffee Importer Despite Low Consumption Rates

Recent developments have shed light on China's evolving role in the global coffee market, highlighting its potential as a significant long-term importer. Coffee futures prices on ICE Europe and domestic markets experienced a sharp decline on February 23, 2024, driven by speculation and liquidation activity. China maintained its position as the sixth largest importer of Brazilian coffee in Jan-24, marking a notable increase in imports compared to the H2-23. This shift is due to variations in differentials and the diversion of imports from Ethiopia.

Despite the rise, China currently only accounts for 4% of Brazil's total coffee exports, compared to established destinations like the US (15%) and Japan (6%). China's per capita coffee consumption remains significantly lower than the global average, with an average individual consuming only 0.21 kg annually compared to the global average of 1.3 kg. China transitioned from a net coffee producer to a net importer around the 2010/11 coffee cycle. The majority of domestic consumption is split equally between roasted and ground coffee and instant coffee. If China maintains its current annual per capita consumption growth rate of 12%, it could potentially become the fifth largest coffee consumer globally, surpassing countries like Japan. However, reaching global average consumption levels would require overcoming cultural barriers, such as the established tea-drinking tradition.