GLOBAL – Global coffee prices have surged to three-week highs due to escalating concerns over prolonged dry conditions in key coffee-producing regions of Brazil and Vietnam.
The adverse weather is expected to significantly impact coffee crops, potentially leading to a reduction in global production.
In Brazil’s Minas Gerais region, no rainfall was recorded for the past four consecutive weeks, with precipitation at 0% of the historical average.
Similarly, Vietnam’s Central Highlands, another critical coffee-producing region, has also seen a significant drop in rainfall compared to historical averages. These conditions have raised alarms about the potential damage to coffee crops in these critical regions.
Vietnam, the world’s largest producer of robusta coffee beans, is facing particularly tight supplies. The country’s agriculture department has projected a 20 percent drop in coffee production for the 2023/24 crop year, amounting to 1.472 million metric tons, the smallest crop in four years
Additionally, the Vietnam Coffee Association reported that coffee exports are expected to fall by 20 percent year-on-year to 1.336 million metric tons.
Global coffee exports in March increased by 8.1 percent year-on-year to 12.99 million bags, while exports from October to March rose by 10.4 percent year-on-year to 69.16 million bags.
Another factor impacting coffee prices is the recent rebound in coffee inventories. Stockpiles of Robusta coffee, which had previously fallen to record lows, have shown some recovery. This rebound is seen as a negative factor for prices, despite the overall tight supply outlook.
The El Niño weather phenomenon continues to influence coffee markets, with heavy rains in Brazil and drought conditions in India further affecting coffee production.
The USDA’s Foreign Agriculture Service (FAS) has projected a 4.2 percent year-on-year increase in global coffee production for the 2023/24 season. This includes a significant 10.7 percent increase in arabica coffee production to 97.3 million bags, although robusta production is expected to decline by 3.3 percent to 74.1 million bags.
In Colombia, the world’s second-largest producer of arabica coffee, production is forecasted to rise by 7.5 percent year-on-year.
Kenya earns US$5.35M in coffee auction
Meanwhile, in Kenya, coffee farmers earned Kes708.7 million (US$5.35M)at this week’s Nairobi Coffee Exchange (NCE) auction, with a total of 21,311 bags (1,308,310 kilos) offered for sale.
The average price per 50-kilo bag of coffee increased to Kes34,230 (US$258.34), up from Kes25,511 (US$192.54)the previous week.
Lisper Ndung’u, CEO of NCE, noted a recent decline in returns due to a decreased quantity of grade AA coffee, highlighting ongoing challenges in the coffee market amidst fluctuating weather patterns and production forecasts.
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