RNY Market Watch: March Green Coffee Price

pallets of coffee stacked in the Royal New York coffee warehouse

Welcome to our March edition of RNY Market Watch! Andrew Blyth & Tom McLaughlin are here to provide you with the latest insight into the green coffee market price as of March 2023.

What’s the latest with the green coffee market price?

Thanks for tuning in to our latest market report! It’s been an interesting time in the landscape of domestic finance and banking with the news of Silicon Valley and Signature banks collapse on everyone’s lips. As it stands now, other banks both domestic and foreign are being evaluated for their overall health and exposure. Thankfully, this has not had a direct impact on the coffee market. We don’t expect any significant repercussions thru the coffee industry. However, currency volatility, rising interest rates, and uncertain equity markets do have an influence on the direction of commodities across the board.

Volatility of the green coffee market price

Focusing on coffee, volatility continues to be front and center for coffee prices this year. We have seen the ICE “C” market futures prices trade just under $1.4300/lb on Jan 11, only to see prices spike up to $1.9415 six weeks later. The past couple of weeks prices have eased a bit, settling at $1.7545 on Mar 14th. Although coffee is a commodity traded with a long history of price volatility, the price action the past few years has been somewhat unusual.

Years ago, The International Coffee Organization (ICO) played a significant role in trying to help control coffee prices to assist industry participants (roasters, importers, producers) in effectively managing price risks. Somewhat how OPEC helps its members price crude oil. For many years, the ICO looked at a range of $1.20-$1.40 as a fair price for the industry. Over time, there have been many price shocks in coffee, either from oversupply or global economics. For example, after 9/11 coffee prices traded under $.45/lb. Additionally, weather related events like frost and drought, mainly in Brazil, have sent prices skyrocketing.

Coffee prices… adjusted for inflation?

These price shocks are invariably temporary. Coffee prices for the last 40 years or so gradually get back to that $1.20-$1.40 range. It just always seemed like that was the appropriate value for coffee.

An argument may certainly be made that coffee prices have not been adjusted for inflation for 40 years. With global inflation roaring out of control post COVID pandemic, coffee prices have spent the better part of 2 years at what would be considered elevated levels. The amount of time spent at these higher levels has been unusual. It certainly gives us cause to wonder if maybe $1.70-$2.00 could be our new normal coffee price?

There have been arguments from producing countries that costs to produce coffee are significantly higher. Increased production costs include fertilizer, energy, and labor costs among others.

Consider also immigration changes which has diminished the labor pool in many producing countries. Suffice to say, we may be entering a new time of coffee prices. Only time will tell.

Impact of supply and demand on the green coffee market price

Supply and demand continues to be an important variable in the coffee price. Recent data has been somewhat inconclusive to help gauge the next move in price. The Colombian Coffee Federation reported that although February coffee exports fell -6% y/y to 928,000 bags, coffee production in Feb rose 10% y/y to 1,025,000. Excessive rain the past few years in Colombia has diminished production. Cecafe reported that February Brazil coffee exports were at 2,395,984 bags, the lowest monthly export number in years. It is believed that farmers used the recent high prices to sell much of their past inventory. Additionally, they may be holding back on selling remaining inventory, hoping for prices to get back over $2.00. Vietnam’s General Statistics Office reported Vietnam’s Jan-Feb robusta exports were down -13% y/y at 340,000 Metric tons.

On the other side of the supply demand equation is that exports from Central America have been very good. This may have helped offset the low numbers from Brazil. Honduras coffee exports grew 31.8% in February as compared to February ’22.

What’s to come?

Both the “C” market and origin differential volatility will continue to be an ongoing conversation. Generally speaking, it appears that global demand is being sufficiently satisfied by global supply.

For now the market is moving sideways to slightly lower settling into the mid $1.70’s. Looking back, the “C market is almost $.50 cents per lb lower in March 2023 vs March 2022. This is a great time to purchase a wide range of new crop coffees that are soon to arrive.

March thru July/August is historically the busiest time of year for new crop arrivals. We see lots of fresh coffee from Central America and Ethiopia, some of our industry most important origins. Reach out to your trader to review past usage, new arrivals and current offers or contact us here! As always, we’re here to help.