W2 Coffee Update: Red Sea Tensions Cause Global Coffee Export Delay, Brazil and India Predict 3.3% and 10% Production Increase Respectively

36% of Global Coffee Exports May Face Delays Amidst Red Sea Tensions

The beginning of 2024 has witnessed heightened tensions in the Red Sea, directly impacting global coffee exports, particularly from crucial coffee-producing countries like Vietnam, Indonesia, and India. The conflicts have triggered a substantial 61% surge in global container rates within the last two weeks, reaching USD 2,670 per 40-foot container, as the World Container Index reported. Attacks on vessels have compelled ships to take longer alternative routes, affecting crucial routes linking Asia to Europe and the East Coast of the United States (US).

Additionally, approximately 36% of global coffee exports in the first quarter of 2024 may face delays. The escalation in tensions may stimulate higher export volumes from countries like Brazil and Uganda, supported by Brazilian availability in marketing year (MY) 2023/2024 and the secondary harvest in Uganda.

Adverse Weather Threatens Coffee Production in Três Pontas and São Mateus, Brazil

Adverse weather conditions in the southern regions of Três Pontas and São Mateus in Brazil are raising concerns among coffee producers as the 2024/25 harvest enters a critical development phase. Precipitation levels in Três Pontas have fallen 30% below average, while São Mateus has recorded only 20% of expected rainfall despite widespread irrigation efforts. These conditions raise concerns about the outlook for coffee production in the two regions, highlighting the delicate nature of coffee cultivation and the market's susceptibility to climatic variations. The below-normal rainfall levels pose a significant threat to the 2024/25 crop year, emphasizing the imperative need for continued monitoring of weather conditions in the coffee-producing regions of the country.

Indian Coffee Exports Predicted to Increase by 10% in 2024

The Indian Coffee Exporters Association (ICEA) predicts a 10% year-on-year (YoY) increase in coffee exports from 271.42 thousand metric tons (mt) in 2023 to 298 thousand mt in 2024. The demand for Indian coffee has increased due to the continuously growing global prices caused by production issues in Vietnam. The world's largest producer of Robusta coffee, Vietnam is expected to produce less in the 2023/24 season, causing global coffee trading prices to hit a 15-year high. Three-quarters of India's coffee production is exported to countries like Italy, Germany, and Belgium. Indian coffee is typically considered superior to the global benchmark due to its hand-picked and sun-dried quality.

Coffee Production Forecasted to Increase in Brazil by 3.3% YoY in 2024

According to the Brazilian Institute of Geography and Statistics (IBGE), Brazil is anticipated to produce 3.5 million metric tons (mmt) of coffee in 2024, equivalent to 58.9 million 60-kilogram (kg) bags. This represents a 3.3% YoY growth compared to 2023. Arabica coffee production is expected to increase by 3.6% YoY, reaching 2.452 mmt (40.9 million 60-kg bags). The cultivation area for Arabica coffee is expected to grow by 1.1% YoY, while the average yield is expected to increase by 2.4% YoY. Similarly, Canephora coffee is predicted to increase by 2.8% YoY, with production expected to reach 1.08 mmt (18 million 60-kg bags). The cultivation area for Canephora coffee is expected to increase by 0.8% YoY, while the average yield is forecast to increase by 2.0% compared to 2023.