Coffee prices peaked 2 years due to rapidly increasing demand in Asia.
Coffee prices on the international market increased rapidly due to concerns about insufficient supply, the Nikkei Asian Review said.
The two largest coffee exporters in the world, Brazil and Vietnam, are forecast to reduce production in the season ending in September 2020. Meanwhile, demand for coffee in Asia is increasing sharply.
According to data from the US Department of Agriculture, coffee consumption in Indonesia will increase by 54%, in Vietnam will increase by 14% and in China will increase by 16% during the 5-year period ending in September 2020. In China, the popular coffee chain Luckin Coffee has increased its total number of stores to 3,680 by the end of the third quarter, equivalent to an increase of 209.5% compared to a year ago.
For this reason, the price of arabica coffee futures in the New York market has increased nearly 30% in the period since mid-November until now, reaching 132 cents / pound, the highest level since the end of September 2017.
According to the US Department of Agriculture, Brazil can produce 58 million 60-kg bags of coffee in the crop ending in September 2020, down 10% from the previous crop. Brazil's coffee output is expected to be cut due to drought in Minas Gerais, the country's largest coffee growing region, where purchases this year are only about 60% of recent years.
Forecasts of Brazil's coffee inventories also fell to 1.38 million bags, less than half compared to the forecast of 2.87 million bags released in June and down nearly 40% compared to the season. before.
Not only Brazil but also many other coffee producing countries can also witness a decline in production. "Vietnam's coffee exports in the first 7 months of 2019 have decreased by 15% over the same period last year," said Shiro Ozawa, an adviser of Wataru coffee trading company in Tokyo.
In Honduras, the world's largest coffee producer, coffee production is forecast to fall by 7% in the crop ending in September 2020, also due to the drought.
The momentum of coffee consumption growth in Asia has been strong in recent years, contributing to the increasing trend of drinking coffee globally. The US Department of Agriculture forecasts that global coffee consumption in the crop year ending in September 2020 will increase by 14% compared to 5 years ago.
With rising incomes and the trend of "Westernizing" the taste in emerging economies, it is unlikely that coffee consumption will slow down. This raises concerns about the shortage of coffee supply in the world.
The price of coffee on the international market has been below 100 cents / pound for most of the past 1 year, in which the price dropped to 80 cents / pound earlier this year. Such low coffee prices have caused many Latin American coffee farms to abandon one crop to switch to other crops. For this reason, the risk of supply shortage reappears and coffee prices rise again.
However, the current increase in the price of coffee beans is forecasted to temporarily not affect the price of coffee products for consumers, as coffee retail companies have all purchased coffee beans in advance to store. "Coffee prices at the shops may not increase immediately, because we have bought coffee beans before," said a representative of Tully’s Coffee Japan.
In addition to the supply-demand situation, coffee prices are also affected by the fluctuations of the Brazilian Real exchange rate. Real currency's downward trend has been considered as a factor limiting the increase in the price of coffee.
Currently, the Real is trading at about 4 Real for 1 USD, compared to a record low of 4.26 Real for 1 USD at the end of November. Because coffee is traded on the international market in USD, the loss The price of the Real against the USD helps Brazil export more coffee and helps coffee growers in this country to improve their income.
In addition, the coffee crop beginning in October 2020 is expected to bring a record production of 66 million bags to Brazil, thereby helping to limit the price increase of coffee in the international market.