RNY Market Watch: Are Coffee Prices Going Up?

Are coffee prices going up, you ask? We hope this regular dose of information helps you to make the best purchasing decisions possible, read on below!

What happened this month:

Another month has passed and the coffee futures market seems to have stalled over the past 4 weeks, with little change in price. The normal coffee metrics surrounding supply and demand remain relevant. However, macro concerns, such as global inflation, ongoing logistical challenges and rising fertilizer and labor costs, continue to support higher prices for many commodities, including coffee. Looking at a snapshot of the coffee world over the past month, there has been much focus and talk recently about the size of the current Brazil coffee harvest. It’s no surprise that with Brazil annually producing roughly a third of the world’s coffee, the Brazil crop number will largely influence coffee prices.

So, are coffee prices going up?

Monthly Brazil coffee export numbers released by CECAFE help to give traders a clue as to future price action. June export numbers were larger y/y, and also larger than the 5-year June average. This helped to push prices below $2 in early July. Unfortunately, that was a brief moment in the market with little follow-through to the downside. After June we were hoping for another good report on the July export number. However, it came in at 2,476,437, the lowest number of monthly exports since 2018. This helped to push futures prices up to $2.23/lb on August 12.

July export numbers for some other important producing nations were also lower than usual. Colombian July coffee production fell 22% y/y to 944,000 bags from 1.2 million bags. Although Vietnam Jan-July coffee exports were up 18.4% y/y, Vietnam July exports fell 17.1% month / month to 113,852 tons. Another contributing metric we reported on last month was the ICE Certified Coffee Stocks (think OPEC for Oil) which were being drawn down consistently throughout the month of July. Recently the reduction in certified stocks has eased slightly as drawdowns of the ICE Certified coffee in warehouses have slowed for the time being. With coffee differentials remaining high, it is unlikely we will see any large increase in certified coffee stocks anytime soon. Certified coffees remain a relatively cheaper option for institutional roasters.

So, what does all of this mean today?

Stay the course. Keep your sourcing plan focused on the coffees you’ll need to satisfy your customers in the next 3-6 months.  Coffees on the lower end of the specialty range are at consistently elevated levels with the higher marker, which can narrow the gap with higher scoring, micro lot style coffees. Currently, there are many market-insensitive, high-scoring lots available at moderate premiums to larger yield “regional” style coffees. This might create an opportunity to offer something exceptional to your customer at a nominal premium. To that point, keep an eye on new arrival micro lots from Costa Rica, Honduras and Colombia. We’ll also have full lots of exceptional Ethiopians arriving regularly.

As always, for the best guidance and suggestions, contact us for suggestions, samples and support in forecasting forward needs.