News of good weather conditions has seen coffee prices drop from their yearlong upward trend.
For the past year coffee has been on a steady upward trend, now the trend has broken on reports of new crops in Indonesia, favourable weather conditions and a reduction in coffee consumption in Northern Hemisphere countries.
Announcements from the Green Coffee Association of the U.S.A. put warehouse stocks at 43% less in October, but this figure did not include the in transit bulk container coffees or onsite roaster inventories. Also, within the last week, the USDA (United States Department of Agriculture) Foreign Service has given positive reports on ‘better than expected’ output in Brazil, Columbia, India and Indonesia.
Having suffered droughts and rains, the forecast for Brazilian coffee, the world’s largest output, was better than expected. Brazilian coffee production for 2014/15 was revised upward to 51.2 million 60-kg bags, a 1.7 million bag increase compared to previous estimate due to better than expected yields in some growing areas, but still off 3.3 million bags from the previous year. Similarly, coffee exports were revised up marginally to 33.53 million bags, but remain 600,000 below the previous year. Carry-over stocks are projected at 6.98 million bags.
Colombian coffee production in marketing year (MY) 2014/15 is expected to increase to 12.3 million bags (1 bag = 60 kilograms – unless otherwise noted), green bean equivalent (GBE), slightly above Post’s estimate of 11.9 million bags in May 2014. Drought conditions from the El Niño phenomenon were predicted for the second half of 2014; however, weather conditions remain normal with little impact on production. Exports are forecast to increase to 11.3 million bags in MY2014/15, a marginal increase from the May 2014 estimate of 11 million bags.
Growing coffee consumption in Indonesia is transforming Indonesia’s coffee trade. Industry sources estimate that local consumption growth (six to eight percent) is outpacing production growth (two or three percent). Given the reported growth of local coffee consumption, Post revises 2013/14 domestic use to 2.83 million bags (GBE) and 2014/15 domestic use to 2.9 million bags. 2014/15 Arabica production is revised down 100,000 bags to 1.45 million bags, following reports of drier weather in northern Sumatra.
India’s 2014/15 coffee crop (Oct/Sep) is forecast at 5.1 million 60 kg bags, marginally higher than the revised MY 2013/14 estimate. The forecast Robusta crop increase should offset the decline in Arabica yields caused by pest pressure and the smaller ‘off’ year crop. Lower export estimates coupled with rising imports have raised stock levels in MY 2013/14 and 2014/15.
Report courtesy of USDA
Coffee chart on MT4 showing this week’s fall against better than expected crops from the main production countries in the world.
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