W26: Coffee Update

In W26 in the coffee landscape, Arabica coffee prices experienced fluctuations during the week on the New York Stock Exchange, primarily influenced by the ongoing harvest in Brazil. On Monday, June 26, September/23 contracts were up 30 points to 165.15 cents/lb and up 180 points to 166.95 cents/lb on Tuesday, June 27, supported by the new figures released by Rabobank, which raised the 2022/23 coffee deficit forecast to -6.4 million bags due to a cut in 2022/23 coffee production by 3.6 million bags to 164 million bags. However, coffee futures for September/23 declined on Wednesday to 161.90 cents/lb and on Thursday to 163.80 cents/lb, as the progress of the Brazilian harvest continued to put pressure on the market. On Friday, June 30, prices decreased further by 75 points to 160.85 cents/lb amid expectations of dry weather and no frost threat in the near future. The market remains focused on developments in Brazil's coffee production.

In May, coffee production in Colombia, the largest producer of mild-washed Arabicas, experienced a significant decline of 21% YoY. Meanwhile, coffee exports in May were down by 10% MoM to 846 thousand bags. Colombia has produced 4.06 million bags so far in 2023, down 9% YoY from 4.47 million bags in 2022. However, Colombia is expected to see a rebound in the 2023/24 season, with a projected increase of 2.7% in coffee production to approximately 11.6 million bags (60kg) due to improved weather conditions after excessive rains and extended cloud cover from the recent La Niña period. Vietnam's coffee exports in June 2023 reached an estimated 150 thousand mt, up 0.1% MoM. In the first half of the year coffee exports totaled approximately 1.016 million mt, earning USD 2.4 billion, representing a 2.2% drop in volume but an increase of 3% YoY in value. On the other hand, new regulations in the European Union (EU) pose challenges for Vietnamese coffee exporters, as Vietnam is the second-largest coffee supplier to the EU. In 2022, Vietnam exported 662 thousand mt of coffee valued at USD 1.68 billion to the EU market.

Coffee production in Africa contributes 10% to the global coffee market and is a vital income source for over 12 million households. Ethiopia leads in terms of export value in 2021 at USD 1.4 billion, followed by Uganda at USD 883 million, Kenya at USD 229.5 million, and Tanzania at USD 187 million. However, overall coffee production and exports in Africa remain low due to a lack of skills and knowledge among farmers, who have limited access to extension services for guidance on cultivating profitable and disease-free crops. To address these challenges and enhance Africa's coffee industry, the International African Coffee Organization (IACO), CABI, and the International Coffee Organization (ICO) have collaborated to launch the Africa Coffee Facility (ACF), a USD 950 million initiative aimed at increasing high-quality coffee exports by 40% globally. According to a report by the National Coffee Institute of Angola (INCA), coffee production in Angola is expected to increase 13% YoY to 6 thousand mt in the 2023 harvest starting on June 23. This growth can be attributed to public policies implemented in recent years, the involvement of 15,900 producers, the expansion of coffee farming to 35,000 hectares, and the technical support provided by INCA to coffee growers. Lastly, in terms of Tanzanian coffee consumption, Japan, Italy, and Germany are the leading consumers. Japan represents 29% of all Tanzanian coffee exports, followed by Italy and Germany at 13%, Belgium at 8%, and the United States and Morocco at 5%.