Coffee is a well-known agricultural product in the general commodities market, as well as one of the world’s most popular beverages today. The coffee market has seen significant fluctuations in recent times, due to the various negative effects that have impacted the global economic market. Let’s find out the coffee market information and forecast the coffee market in 2023
Basic Information On The Coffee Market
The coffee plant is a tropical perennial plant in the flowering plant family – Rubiaceae and this plant is now grown in over 50 nations worldwide. Brazil is the greatest producer of Arabica and coffee beans in the world. Vietnam is the world’s second-biggest producer of coffee, as well as the world’s largest producer and exporter of Robusta coffee. In the coffee market, there are two main types of coffee beans: Robusta and Arabica.
Arabica is the most commonly traded coffee, accounting for 70% of all trades in the market. It has a moderate sour taste with a slightly bitter and sweeter taste, and less acidic taste, making it a favorite among coffee lovers and worldwide coffee shops. Robusta beans account for the remaining 30% of the global coffee trade. Robusta has a richer and deeper flavor than Arabica because of its high caffeine content. Robusta coffee is often less expensive, which makes it ideal for the mass production of instant coffee.
Coffee Market Report
Coffee production has been rising over the years. If the crop year 2003-2004 generated only 105.21 million bags, the crop year 2020-2021 produced 175.35 million bags, a rise of 67%. According to the US Department of Agriculture (USDA), global coffee production would fall by 8.5 million bags (equal to 4.8%) in the crop year 2021-2022 compared to the previous crop year, reaching 167.5 million bags (60 kg/bag).
Based on reason, Arabica coffee in Brazil is entering a poor yield cycle and is being impacted by extreme weather. Furthermore, due to the prolonged drought, Arabica coffee output is expected to fall by nearly 30% in the crop year 2021-2022.
After a significant reduction the previous season, ending stocks are predicted to rise by 2.1 million bags to 34.7 million bags this season.
Global coffee consumption is predicted to rise by 1.8 million bags to 167 million bags, with the European Union, the United States, Japan, and Brazil experiencing the biggest increases. What is the forecast for coffee prices in 2023? While the difficult economic situation in many nations may reduce demand.
Price Movement Of Coffee
Both coffees are traded on ICE in futures contracts at a specified price for delivery at a later date. Furthermore, coffee beans can also be traded using spot contracts, which are agreements for the immediate delivery of products.
Despite a price recovery in 2020, the overall price of Arabica coffee has declined by roughly 1.33% year on year. Meanwhile, Robusta is expected to increase by 0.29% in 2020. Coffee prices will continue to rise in 2021. The second half of 2021 will witness a recovery due to Brazil’s dropping output and an increase in demand as the Covid-19 restrictions are gradually lifted.
Price movement of Arabica Coffee
Following a sideways trend from 2019 to the end of March 2021, with a range of 85.34 – 136.43 US cents/lb, Arabica coffee price has broken out of the resistance zone at 136.42 Us cents/lb from April 2021 and peaked at 258.74 Us cents/lb in February 2022. After the peak time, coffee prices moved sideways, ranging from 194.61 to 258.74 Us cents/lb.
Then in October 2022, coffee price broke out of the previous support level of 194.61 Us cents/lb with a significant volume. In November, coffee price is still downtrend, but there was buying power, although lower than the selling pressure.
The price of Arabica coffee on the ICE continues to fall at the close of the latest trading session on December 10, 2022. Arabica coffee delivered in March 2023 fell by 0.55 US cents to 158.15 US cents/lb, and Arabica coffee delivered in May 2023 dropped by 0.45 US cents to 158.95 US cents/lb (lb= 0.45 kg). The volume of trades remained above average. The price of Arabica coffee is still decreasing in the first weeks of December, but it has been supported at the support level of 148 – 160 US cents/lb and is fluctuating 156 – 176 Us cents/lb.
Price movement of Robusta Coffee
Robusta coffee price increased to $2,462 on December 20, 2021, from $1,300 in January and coffee price increased by 71% since 2021. Robusta coffee price plummeted dramatically on the ICE.
The price of Robusta coffee supplied in January 2023 fell 34 USD to $1,884 USD/MT, while the price of Robusta coffee delivered in March 2023 fell 12 USD to 1,864 USD/MT. The trading volume is much above average.
Coffee Market Forecast In 2023
Brazilian coffee producers predict a bountiful harvest following a poor output in the 2021/2022 crop year. In contrast, several nations are experiencing a cost-of-living crisis as a result of rising inflation and interest rates.
These factors have put significant downward pressure on coffee prices in the approaching crop year:
- On the supply side, Brazil’s frequent rainfall and plentiful sunshine have provided an ideal climate for Brazilian coffee production in the crop year 2023-2024.
- Regarding consumption: tighter monetary policies in major areas such as the United States and the European Union have increased worries of a recession, which could reduce demand for the world’s most popular beverage.