The global coffee deficit in the 2019/20 cycle, projected at 4.1 million bags, should bring a slight improvement in international prices of beans. "In the coming months, Brazilian flowering and the start of harvests in Vietnam and Central America may provide new foundations for the market," says Rabobank in a quarterly report on agricultural commodities.
Rabobank estimates that ICE Futures US arabica coffee prices should remain volatile because of currency instability and non-trading fund participation. Product prices are projected by the bank at about 105 cents per pound in 2019.
According to Rabobank, the second half of 2019 remains challenging. The global surplus in the 2018/19 cycle of 6.9 million bags, boosted by record harvests in Brazil and Vietnam, coupled with the expectation of a good Vietnamese supply in 2019/20 and Brazil in 2020/21, limits a sharp improvement in prices.
The 2019/20 Brazilian harvest is almost over. In this current negative cycle, Rabobank expects 57.6 million bags of coffee to be harvested, of which 38.1 million bags of the Arabica type. "Despite the great amount produced, the 2019/20 Brazilian crop presented problems in the quality of the drink," reports the bank.
The uneven maturation of cherries and the isolated rainfall during the harvest period were points that limited the quality. Additionally, lower rainfall in January hampered grain filling and coffee cherry production. "It is possible to see an increase in premiums for better quality coffees in the domestic market and an increase in demand for washed coffees in the international market," notes Rabobank.
Climate variations have impacted other producing regions. Rabobank estimates a 6% reduction in the 2019/20 crop in Central America and Mexico over the previous cycle, reflecting lower than average rainfall in recent months. Ethiopia is experiencing a similar climate situation and a reduction of 10% from 2018/19 is expected. However, in Vietnam, with the recent improvement in climate, a harvest of 30 million bags is expected in the 2019/20 cycle. In Colombia, production should be stable for the 2019/20 crop, at 13.7 million bags.
« Back to index