COFFEE GLOBAL MARKET WEEKLY UPDATES – 12 July 2024

Weekly Global Coffee Report

Part 1: Inputs and Feedback from Global Coffee Traders, Farmers, and Exporters

India

• Price and Demand: Traders report that while coffee prices are increasing daily, market demand remains low.
• Climate: Farmers expect a consistent crop yield next year, citing favorable weather conditions.

Colombia

• Internal Market: Internal prices have surged, leading to a decline in sales.
• Weather Conditions: Continuous rain is reported, with production being stable and the harvest nearly complete.

Vietnam

• Market Conditions: Tight supplies have led to slightly increased prices. Despite a 10.6% decrease in export volume (902,000 tonnes in the first half of the year), export revenue increased by 34.5% to $3.2 billion.
• Future Outlook: With depleted stock levels, monthly exports are expected to decline until new supplies from the 2024/25 crop season arrive around November.
• Long-Term Forecasts: Volcafe projects Vietnam’s 2024/25 robusta coffee crop to be the lowest in 13 years at 24 million bags due to poor rainfall, resulting in significant damage to coffee blossoms. A global robusta deficit of 4.6 million bags is expected for 2024/25.

Brazil

• Harvest and Weather: The end of the harvest season is marked by high temperatures and severe drought. Young coffee crops are particularly affected, with no significant rainfall forecasted for the next 30 days. This situation necessitates close monitoring of weather conditions.

Rwanda

• Production Status: Harvest and processing are complete, with the export phase now beginning.

Global Observations

• Vietnam’s Coffee Production: According to various sources, Vietnam’s coffee production for the 2023/24 crop year is expected to decline by 20% to 1.472 MMT, the smallest crop in four years due to drought. The USDA FAS projects a slight dip in robusta coffee production in the 2024/25 marketing year to 27.9 million bags from 28 million bags in 2023/24.

General Sentiment

• Traders and farmers find it challenging to reconcile differing figures and projections. They seek more qualitative insights and contextual understanding to navigate the complex market dynamics.

Part 2: Latest News and Updates

Brazil

• Export Performance: Brazilian coffee exports reached a historic volume of 47.3 million 60 kg bags in the 2023/24 harvest year, marking a 32.7% increase from the previous year. This increase is attributed to a better harvest after two smaller cycles, capturing market share from reduced supplies in other producing countries like Indonesia and Vietnam.
• Revenue Growth: Foreign exchange revenue from shipments rose by 20.7%, reaching $9.826 billion, the highest in the history of Brazilian coffee exports.
• Logistical Challenges: Despite record exports, logistical bottlenecks persist, particularly in the Port of Santos, where delays and additional costs are common due to geopolitical conflicts and internal port exhaustion.
• Brazil: Severe dry weather continues to threaten Brazil’s coffee production, particularly in the Minas Gerais region, which received only 24% of its historical average rainfall last week. This region accounts for about 30% of Brazil’s arabica crop. Brazil’s coffee harvest is 58% completed as of early July, faster than the previous year’s pace and the five-year average .
• The USDA FAS projects a 4.2% increase in global coffee production for 2024/25, with Brazil’s arabica production expected to rise by 7.3% due to higher yields and increased planted acreage .
• Brazil: Brazil’s May green coffee exports surged by 90% year-over-year, reflecting strong production and export capabilities. The USDA’s FAS raised Brazil’s 2023/24 coffee export estimate to 44.9 million bags, reinforcing Brazil’s position as the world’s largest arabica producer .

South Africa

• Local Coffee Prices: Although headline inflation steadied at 5.2% year-on-year in May 2024, coffee prices saw significant increases. Instant coffee rose by 30.6% year-on-year, while ground coffee or coffee beans increased by 12.7% year-on-year.

Uganda

• Production and Exports: Uganda’s coffee production and exports are expected to rise slightly in 2024/25 due to favorable crop conditions and government interventions to combat pests and diseases. The government is also planning to register all coffee farmers and establish a national traceability system to comply with the new EU deforestation-free products law (EUDR).

Vietnam

• Vietnam’s coffee exports fell significantly in June, dropping 50.4% year-over-year to the smallest amount for June in 13 years. The 2024/25 robusta coffee crop is projected to be the lowest in 13 years at 24 million bags due to poor rainfall. This is expected to result in a global robusta deficit of 4.6 million bags .

Costa Rica

• Costa Rica also reported a 7.6% year-over-year decrease in coffee exports during the Oct-Jun period, supporting higher arabica prices .

Coffee Prices in the U.S.

• Price Increase: Persistent supply chain issues and higher import costs have led to a significant rise in coffee prices in the U.S. From 2021 to 2023, import prices soared by 65% due to production and supply challenges. Ground coffee prices per pound increased by nearly 21% over the last year, while ground decaffeinated coffee prices grew by 17% per unit .
• Supply Chain Issues: Key producers like Brazil, Vietnam, and Colombia are facing severe weather conditions impacting their coffee yields. In Brazil, fires and frosts have damaged up to 20% of growing areas, and significant droughts due to lower-than-average rainfall have further impacted production. Vietnam faces export disruptions and reduced workforce availability, while Colombian crops are declining due to reduced use of high-cost fertilizers.
  
  
• Consumption Trends: Despite rising prices, coffee consumption in the U.S. remains at an all-time high. The National Coffee Association (NCA) reports a 37% increase in daily coffee drinkers over the past 20 years, with 75% of American adults consuming coffee at least once a week. The trend towards at-home coffee consumption has been particularly strong since the pandemic .

Market Dynamics and Production Forecasts

• Global Production and Exports: The USDA’s Foreign Agriculture Service (FAS) projects a 4.2% increase in world coffee production for 2024/25, reaching 176.235 million bags. Arabica production is expected to rise by 4.4% and robusta by 3.9%. Despite these increases, a global robusta deficit is still anticipated, exacerbating supply constraints.
• Consumer Behavior: High prices may drive consumers to seek more cost-effective at-home coffee solutions. This trend is supported by the ongoing high levels of at-home coffee consumption, which accounts for 70% of all coffee drinking occasions in the U.S. Increased creativity in at-home coffee preparations may become more common as consumers look to offset the cost of specialty drinks from coffee shops.
• Global Trends: The International Coffee Organization (ICO) anticipates a 5.8% increase in global coffee production for 2023/24, resulting in a 1 million bag surplus. However, consumption is expected to grow by 2.2%, potentially balancing the market .

Impact of Inventory Levels

• Robusta Inventories: A significant increase in ICE-monitored robusta coffee inventories, which reached a one-year high, has contributed to the recent price consolidation. Higher inventory levels help mitigate supply fears, stabilizing prices .
• Arabica Inventories: Similarly, ICE-monitored arabica coffee inventories rose to a 16-month high, further easing supply concerns. This rebound from historically low levels in November 2023 is a bearish factor for prices .