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W20: Coffee Update

Updated May 26, 2023
W20: Coffee Update

In W20 in the coffee landscape, on Tuesday, May 16 July Robusta coffee on ICE increased 0.9% to USD 2,511/MT, hitting new 12-year highs as Vietnamese producers held onto stockpiles, Indonesian supply dropped, and Brazil's harvest continued to be slower than usual. Vietnam harvested its smallest crop in four years after farmers focused on planting more profitable crops such as avocados and durians to cope with skyrocketing fertiliser prices following the Russia-Ukraine war. On May 18, Robusta coffee hit 12-year highs, for three consecutive days, up 2.8%, to USD 2,582/MT, as farmers in Vietnam, Brazil, and Indonesia, the world's three biggest producers, hesitated to sell. Indonesia anticipates a 20–30% decline in coffee production during the new season of May to July. Regarding the Arabica market, on Monday, May 15, Arabica rose to 189.40 cents/lbp as ICE arabica coffee stockpiles dropped to a 5-and-a-half-month low of 642,776 bags. However, it dropped to 187.15 cents/lbp on May 16 and by 0.4% to 186.05 cents/lbp on Wednesday, May 17, as the market continued to monitor the development of the Brazilian crop along with concerns about supply with ICE inventories continuing to decrease. Moreover, concern about demand due to the global economic situation puts downward pressure on the quotations. On Friday, May 19, the market appreciated significantly to 191.10 cents/lbp, recovering from the lows of the previous days, with weather conditions favouring the advance of the harvest in Brazil.

Brazil's 2023/24 coffee harvest is currently at 9%, up 4% WoW, but still below the country's long-term average. About 10–15% of the crop was harvested in Espírito Santo, Brazil's main Robusta-producing state. In Rondônia, which cultivates the so-called Amazonian Robusta, around 30% of the harvest has already been completed. In 2023, 54.74M bags of 60kg of Brazilian coffee production are anticipated, a rise of 7.50% YoY. According to estimates, 37.93M bags of Arabica coffee will be harvested, accounting for 69.30% of the country's total coffee production. In contrast, the estimated production of Robusta coffee for the current season is 16.81M bags, a decrease of 7.60%. According to the USDA, total coffee production in Guatemala in 2023/24 is expected to reach 3.435M 60kg bags, a drop of 3% from 3.480M bags in 2022/23. Production of Arabica coffee is projected to be 3.305M bags for the 2023/24 season, while Robusta coffee will produce 130,000 bags. The drop in production is due to the high cost of fertilizers and the lack of labor negatively impacting the 2023/24 harvest. In April, Uganda exported coffee worth USD 59.99M USD, with Robusta coffee being the most exported variety at 238,636 bags (60kg) valued at USD 31.50M, followed by Arabica at 134,974 bags (60kg) worth USD 28.49M.

Even if global temperatures are kept within limits set by international agreements, climate change, which includes rising temperatures, unpredictable rainfall, disease, droughts, and landslides, is predicted to reduce the amount of land suitable for growing coffee by 54% by the year 2100. Brazilian and Vietnamese coffee, two nations that are particularly sensitive to climate change, account for more than half of the coffee consumed in the U.K. In W19, Vietnam recorded its warmest temperature on record, at 44.1 degrees Celsius. Lastly, over the previous 12 years, robusta coffee bean wholesale prices have increased to their highest level in Russia. As the price increased, people started to switch to more reasonably priced varieties. Subsequently, the consumption of tea and coffee over the past year has decreased by 6% and 4% respectively.

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