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Trade4go
Dec 6th, 2024
Original content
Coffee prices are expected to rise by 20 to 25% by 2025, driven by adverse weather conditions impacting major producers in Brazil and Vietnam. Drought in Brazil, the leading Arabica producer, and rare storms in Vietnam, the largest Robusta supplier, are forecasted to reduce yields significantly. A market entirely reliant on imported coffee, Russia faces compounded price pressures from global supply constraints and USD exchange rates. The ongoing record-breaking highs in coffee futures underscore the market's vulnerability to these disruptions.
Coffee markets are experiencing significant upheaval due to supply constraints and upcoming European Union (EU) regulations. Concerns over global shortages have prompted panic buying as major roasters stockpile to secure future inventories. Severe drought and subsequent heavy rains in Brazil threaten production, and adverse weather causes Robusta supply challenges in Vietnam. The EU's new anti-deforestation (EUDR) law intensifies market pressure by requiring importers to verify sustainable sourcing, creating additional logistical hurdles. Combined with geopolitical uncertainties, these factors are fueling a surge in demand ahead of anticipated market disruptions.
Arabica coffee futures recorded their most significant monthly gain in a decade, surging nearly 32% in November and 70% year-to-date (YTD), driven by global supply concerns. Severe drought earlier this year in Brazil and adverse weather in Vietnam have exacerbated fears of tighter supplies. Coffee stocks are about one-third below the long-term average after two years of consumption outpacing production. Preliminary forecasts for Brazil's 2025/26 crop indicate further declines, suggesting continued market pressure.
Brazil's coffee sector has seen significant growth in 2024, with the gross value of production reaching USD 12.08 billion (BRL 72.25 billion), a 39.77% increase from the previous year. The southeastern region, the country's coffee hub, accounts for 86.14% of this value, with Minas Gerais contributing the most at USD 6.12 billion (BRL 36.62 billion). The northeast follows with USD 860 million (BRL 5.12 billion), led by Bahia's USD 850 million (BRL 5.09 billion), while the northern region, dominated by Rondônia, earned USD 570 million (BRL 3.41 billion). Smaller contributions came from the south and central-west regions. These figures highlight the coffee industry's vital role in Brazil's economy, mainly in rural development.
Brazil's coffee industry faced a critical 2024 due to one of the worst droughts in decades, particularly affecting regions like Sul de Minas, Cerrado Mineiro, and Alta Mogiana. The 2024 harvest saw a slight 0.5% decline, but experts warn of a potential 40% drop in Arabica production by 2025, driven by prolonged dry spells, high temperatures, and uneven rainfall. Deficits exceeding 300 millimeters (mm) of rain in key areas have strained coffee plants, while the adoption of drip irrigation shows promise, boosting yields by up to 20 sacks per hectare (ha). Essential for sustainability, this irrigation strategy can mitigate water scarcity impacts and help combat-related issues such as pests. However, the coffee sector must act swiftly to implement solutions and adapt to increasing climate challenges.
A shipment of 19 tons of coffee beans from Brazil successfully cleared customs at Tianjin New Port, showcasing the growing popularity of Brazilian coffee in China. Brazilian coffee is a top choice for Chinese consumers because of its rich aroma, smooth taste, and low acidity. From Jan-24 to Oct-24, Tianjin imported 211.1 tons of Brazilian coffee beans worth approximately USD 929.7 (CNY 6.75 million), reflecting a year-on-year (YoY) growth of 22.1% in volume and 25.6% in value. Tianjin Customs streamlined the import processes by offering pre-declaration, consolidated taxation, and fast-track clearance, ensuring zero port delays and product quality. Celebrating 50 years of China-Brazil relations, the initiative strengthens bilateral trade, allowing enterprises to capitalize on peak sales periods while fostering deeper economic ties.
Colombia's coffee sector has thrived in 2024, achieving a 19% production increase. This year, 12.9 million 60-kilogram (kg) bags were produced across 600,000 farms, and exports were up 17% from Jan-24 to Oct-24. However, logistical challenges, including container shortages and limited shipping capacity, hinder exports despite strong demand from key markets like the United States (US), Canada, Belgium, Germany, and Japan.
Driven by climate disruptions in Brazil, rising global coffee prices may impact Egypt in 2025. Local prices, currently stable at USD 9.60/kg (EGP 480/kg) for plain and USD 12/kg (EGP 600/kg) for blended coffee, could rise if global trends persist. Increased winter demand, which is up by 25%, may deplete stocks. Egypt's annual consumption of 80,000 tons relies heavily on imports from Indonesia, Vietnam, Brazil, India, and Ethiopia. Local stability hinges on managing global price fluctuations effectively.
At Expocafé 2024, the National Institute of Quality (Inacal) showcased 45 Peruvian Technical Standards (NTP) designed to enhance the global competitiveness of Peruvian coffee. These standards, including 38 NTPs and seven specialized guides, focus on improving coffee cultivation, post-harvest processes, storage, and distribution to meet international quality benchmarks. The Swiss Cooperation and the United Nations Industrial Development Organization (UNIDO) support the initiative, aiming to boost coffee exports. Inacal's efforts also align with Peru's national goal of increasing local coffee consumption by 30% and expanding the country's coffee presence in key international markets.
The Ministry of Foreign Trade and Tourism (Mincetur) emphasized the growing international recognition of Peruvian coffee in over 60 markets, including Germany, the United Kingdom (UK), and South Korea. At the 13th edition of Expocafé Perú 2024, Mincetur showcased the collaboration between the government and the coffee sector to promote Peru's unique coffee identity. In 2023, Peru was the ninth-largest global exporter of unroasted coffee, with exports surpassing USD 820 million. Through initiatives like the Productive Export Route (RPE), Mincetur supports local coffee producers with training and market diversification, helping elevate Peruvian coffee as a high-quality, sustainable specialty product.
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Brazil's coffee prices dropped 11.47% week-on-week (WoW), from USD 7.50/kg in W47 to USD 6.64/kg in W48. This decrease is due to supply and demand fluctuations as the market stabilizes after peak pricing in W47, mixed with a depreciation of the BRL against the USD. However, the long-term price trend is still upward, with month-over-month (MoM) and YoY increases of 2.31% and 15.68%, respectively. The MoM rise is driven by ongoing global supply concerns, mainly due to droughts in Brazil and Vietnam. Geopolitical challenges, such as the EUDR law, also pressure coffee markets. Additionally, fears of further declines in Brazil's Arabica production in 2025 due to weather disruptions and a tighter global supply chain are contributing to rising prices. Strong international demand, particularly from China, where Brazilian coffee exports have increased, also supports the price growth.
Colombia's coffee prices have shown relative stability WoW and MoM, with a slight drop of 0.27% WoW and 0.54% MoM to USD 7.33/kg in W48. However, there has been a significant decline of 6.98% YoY, primarily driven by a 19% increase in coffee production compared to the previous year. Despite this stability, Colombian coffee prices are expected to remain high due to ongoing global supply constraints. These limitations, exacerbated by adverse weather conditions and other market disruptions, push global coffee prices upward, benefiting producers that have kept their supply stable.
Vietnam's coffee prices have significantly increased in the past week, rising by 9.17% WoW from USD 4.47/kg in W47 to USD 4.88/kg in W48. This follows a 14.82% rise MoM from W45. The price surge can be attributed to several factors, including reduced domestic supply and global production shortfalls. The Central Highlands, a major coffee-producing region in Vietnam, has seen limited Robusta availability due to adverse weather conditions, such as the La Niña phenomenon, and crop shifts. Additionally, the farmers' early-season demand and cautious selling strategies have contributed to the price hike. As production struggles to meet growing demand, continued upward pressure on coffee prices in the coming months is expected.
Peru has demonstrated impressive growth in coffee exports, especially in key markets like Germany, the UK, and South Korea. Peruvian coffee is gaining recognition in the global market, driven by quality improvements through initiatives such as Inacal's technical standards and Mincetur's promotional efforts. . These developments align with the rising demand for sustainable and high-quality coffee. Companies looking to diversify their coffee sourcing should consider increasing imports from Peru, where the coffee sector focuses on high-quality, sustainable production methods. Additionally, tapping into the growing markets of South Korea and Europe could provide a competitive edge for businesses looking to target health-conscious or quality-seeking consumers.
The EU's new anti-deforestation law, requiring certification of sustainable sourcing, poses challenges but also offers an opportunity for companies to distinguish themselves as leaders in sustainability. Coffee producers in Brazil, Colombia, and Peru may face increased pressure to comply with these regulations. Still, businesses can turn this into a marketing advantage by highlighting sustainable sourcing and supporting traceability initiatives. Companies can position themselves as pioneers in sustainable coffee by partnering with compliant coffee producers and marketing their products as ethically sourced. Additionally, leveraging EU certifications like Fair Trade or Rainforest Alliance could enhance brand reputation in European markets, where consumers increasingly prioritize sustainability.
Sources: Tridge, Agro Peru, Agro Portal, Astro Awani, Bio Bio Chile, EFE Agro, Food Mate, Interfax RU, Masrawi, PQS, Portal do Agronegocios, Viet Stock, VinaNet, VN Express, VOH
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