Key information
- 70 percent of Brazil's current coffee harvest has been sold, largely for international markets.
- The US Department of Agriculture predicts a significant decline in Brazilian coffee stocks, which will reach only 1.2 million bags by June.
- Arabica futures prices rose to a 13-year high on concerns about potential shortages and a bleak supply outlook in Brazil.
Concerns about dwindling coffee stocks in Brazil, the world's top producer, have sent arabica futures prices to their highest level in 13 years. With next year's harvest just months away, traders are feeling uneasy about potential shortages. Carlos Santana Jr, commercial director of Brazil-based Ecom Group, raised concerns, highlighting the high percentage of coffee already sold by Brazilian producers and worrying about the possibility of reaching the next harvest season with stocks sufficient.
Data from consultancy firm Safras e Mercado reveals that 70 percent of the current harvest has been sold, largely destined for international markets. This figure exceeds the 64 percent recorded in the previous season, indicating a significant export flow. The U.S. Department of Agriculture's Foreign Agricultural Service forecasts a significant decline in Brazilian coffee stocks, which are expected to reach just 1.2 million bags in June, a 26 percent reduction from the previous year.
Supply Chain Challenges
The outlook for next year's harvest adds to these supply concerns. Adverse weather conditions, including drought, have resulted in low numbers of cherries on trees in Brazil, significantly impacting coffee bean production. At the same time, demand for coffees requiring more beans per cup increased, adding to market tensions.
Impact on coffee prices
These factors have fueled a surge in New York Arabica futures prices, reaching levels not seen since 2011. If the current monthly gain of +27 percent holds, it would be the largest increase since February 2014 Arkady Gevorkyan, commodities strategist at Citi, expressed his belief that the upward trend in coffee prices is likely to continue in the short term, revising their three-month target for coffee. Arabica at US$3.10 per pound.
Market Outlook and Consumer Impact
The explosion in demand for ready-to-drink coffee, combined with a bleak supply outlook in Brazil, suggests that prices are likely to remain high until the end of the year. This situation poses a challenge for consumers as food inflation persists.
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