Coffee Market 2017-2018: Analysis

The three main factors affecting global coffee market are, prevailing weather  in producing countries, consumption rate and the state of inventaries. Hence an assessment of these three factors will give us a fair idea of future market. All these factors are sometimes turn to be very complex and hence variation in prediction often occur.

Brazil is  the worlds largest producer of coffee beans. Brazilian coffee growers  have  completed their coffee harvest  for the year 2016-2017. There is a significant increase in Arabica production and significant decrease in Robusta production compared to 2015-2016. The prospect of a good 2017-2018 harvest looks bleak since the rains have come too early, resulting in flowering, but there is little followup rain. The prevailing dry weather is damaging the setting of flowers. If this trend continues for few more days there will be a major dent to good crop prospects.

Vietnam Robusta coffee production was down in 2016-2017 compared to previous year, 2015-2016. Prospects of good 2017-2018 crop is strong owing to good rain and weather conditions.

Production in Colombia has been steadily increasing year on year owing to massive replantation of rust resistant varieties. However 2016-2017 harvest is expected to increase only marginally compared to previous harvest.

Indonesia harvest for 2017-2018  is expected to be flat  to slight increase compared to previous harvest season.

World coffee production for 2017/18 is forecast at 159 million bags (60 kilograms), unchanged from the previous year. Where as global coffee consumption is expected to hit a record 158 million bags.

The stock to use ratio of Coffee for 2017-2018 is forecast at 30 percent which is lowest since 2009-2010, according to Rabobank, concluding that any weather issues before or during next harvest season i.e 2017-2018 will have a exacerbated price impact.


Asia Coffee-Vietnam picks up before holiday, Indonesia flat

Vietnam’s coffee market picked up as global prices supported trade and farmers released beans ahead of a long holiday, while the Indonesian market remained slow, traders said on Thursday.

Vietnamese farmers in coffee-growing Daklak province quoted coffee beans at 37,100-37,500 dong ($1.65) per kg, slightly higher than last week’s 37,000-37,100 dong per kg, tracking London’s rises, traders said.

The London ICE March futures contract jumped to as high as $1,771 a tonne on Wednesday, the highest intra-day level seen since November 30, as roasters bought before Vietnamese producer selling slows for the Tet festival, dealers said.

Traders said the pick-up in local prices had encouraged farmers to cash out ahead of Tet, Vietnam’s lunar new year and its biggest holiday. It falls this year in mid-February, but the price is already attractive enough for a big release.

The 5-percent black and broken grade 2 robusta was traded around a discount of $50 per tonne to the ICE March futures contract, compared with a discount of $30-$45 per tonne a week earlier, traders said.

More contracts were secured this week due to increasing supply in the market and as demand picked up, although only at a modest pace, traders said, noting there was a gap in offers between most importers and exporters.

Vietnamese farmers are expected to sell beans actively up until Feb. 10 before shutting shop for Tet. They will return to trading at the beginning of March, traders said.

In Indonesia, the grade 4 defect 80 robusta traded at a $160 premium to the London March contract this week, unchanged for the past month amid depleting stock, a trader in Lampung said.

The trader said there were some small spot transactions this week. The market is expected to remain quiet until a mini- harvest in March and April.

Source: Reuters

Vietnam Launching $7.5 Million Coffee Development Project

The Vietnamese government has approved a VNĐ170 billion (approximately US$7.5 million) five-year coffee sector development project designed to improve quality, increase exports and develop a premium Vietnamese coffee brand.

Approved by the Ministry of Agriculture and Rural Development, the project will launch next year and run through 2023, with approximately $4.8 million in funding coming from the government and the remainder coming from private and state-owned parties in the coffee sector.

A goal of the program is to add 5 percent to the country’s total coffee value by 2020, and 7 percent by 2023, combining both increased arabica production and increased robusta production. Vietnam has grown to become the world’s second largest coffee-producing country in the world, behind only Brazil, largely due to the proliferation of private- and state-owned robusta plantations over the past two decades.

This project will involve the construction of “large-scale, high-quality growing areas, with updated drying systems, storage facilities and processing plants,” according to an announcement this week by the agriculture ministry, which estimates that each designated areas will have the capacity to produce 2.7 tons of robusta or two tons of arabica per hectare.

The project also centers around the marketing of Vietnamese coffee, both domestically and for the purposes of increasing exports at higher prices. The ministry predicts that Vietnam will reach $3 billion in exports this year.