Welcome to our November edition of Market Watch! Andrew Blyth & Tom McLaughlin are here to provide you with the latest insight into coffee exports, its current high price point and more as of November 2023.

High Price Driven by Weather Concerns

Coffee prices have spiked significantly over the past 6 weeks. The dry, hot weather in Brazil has raised concerns about the development of next summer’s crop. While conditions to date have been favorable, recent above-average temperatures and below-average rainfall worry the coffee industry. That being said, the conclusion of Brazil’s harvest which finished this past summer, exceeded expectations which may have been the primary driver of ICE futures prices trading to 10-month lows on October 10th at $1.4370/lb.

Last week, the USDA announced its final estimate for the upcoming 2023/24 Brazil harvest at 66.3 million bags (arabica 44.9, robusta 21.4). Unsurprisingly, Brazil’s high October coffee export number of 4.35 million bags reflects that current supplies are ample. Higher than usual crop estimates and export numbers are bearish fundamental triggers for the “C” market and should limit the market’s current high price trend. The age-old question is: “When?”

Global Coffee Production

Outside of Brazil, the USDA also forecasts Colombia’s 2023/24 production will rise 7.5% y/y to 11.5 million bags. Even though Colombia’s production has been compromised for the past couple of years due to above-average rainfall, their upcoming season should be significantly better.

Looking at robusta coffee, prices have continued to be steady. Vietnam is the largest robusta producer, and the USDA forecasts the country’s 2023/24 crop production will be lowered by 3.8 million bags. Due to unfavorable weather, this cut will result in a total of 27.5 million bags for export. Indonesia has experienced similarly unfortunate climate conditions. The origin is the 3rd largest robusta producer and is expected to cut coffee exports this year by 35%.

What does this mean for you?

The obvious theme here is the impact weather can have on global coffee production. “Weather markets” have long been a conversation in the agriculture/commodity space and a source of market speculation. With the pace of climate change, I would expect more weather related volatility in the future.

So, where does that leave you, our roasting partners? If you need to buy coffee, look at the big picture; these are not bad market levels, they’re certainly better than 2021 and 2022…especially when you think about the quality that WE as the “specialty” coffee industry provide our customers daily. As many of you already know, we have a great team of Traders who are sourcing and cupping coffees daily. Reach out to discuss the profiles and price points that are right for you. We have great tools for forecasting your future needs to prepare for the next dip in the market so work on a 2024 sourcing and purchasing plan together! We are a phone call away and always happy to help.

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