Coffee prices have significantly decreased since reaching multi-year highs in the spring.
The global coffee market experienced a significant downturn this week as the price of Arabica coffee plummeted to 280 US cents per pound.
This marks the lowest point for the commodity since November 2024, raising concerns among growers, traders, and investors alike.
The impact of this price decrease will undoubtedly be felt across the coffee supply chain, from the smallholder farmers who rely on stable prices for their livelihoods to the large-scale roasters and retailers who may see both opportunities and challenges in the coming months.
At the end of April, Arabica coffee prices were still at more than 400 US cents. In February, a new record high of 430 US cents was established.
Meanwhile, the robusta coffee market experienced an even more dramatic decline than its arabica counterpart, with prices plummeting significantly by late June.
This competitor variety, often favored for its stronger flavor and higher caffeine content, was trading at a mere $3,460 per ton.
This sharp drop highlights a broader market trend impacting the entire coffee industry, with Robusta bearing the brunt of the downturn.
The current price is the lowest it has been in over a year. It was $5,500 at the end of April, and even $5,850 in February.
Rising coffee supply
The significant price correction in coffee prices has occurred, primarily due to the anticipation of increased coffee supply.
The coffee harvest is in full swing in Brazil, by far the largest producer country.
The members of the country’s largest coffee cooperative, Cooxupe, reported that the harvest was 31.4% complete on 27 June, yet still, this is 11 percentage points behind last year’s harvest.
This year, the coffee crop in Brazil and globally is anticipated to reach a record high as well.
In early June, Conab, Brazil’s agricultural authority, increased its crop forecast to 55.7 million 60 kg bags.
Crop volume is projected to increase by 2.7% compared to last year, surpassing the record set two years prior by 1%.
Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report:
The reason for this is a strong increase of 28% in the Robusta crop.
The US Department of Agriculture (USDA) last week forecast a record global crop of 178.7 million bags. This increase is attributed not only to Brazil but also to anticipated crop surges in Vietnam, Indonesia, and Ethiopia.
Uncertainties
Uncertainties persist, however. For instance, reports indicate that numerous Arabica cherries in Brazil detached from trees and remained on the ground for several weeks prior to harvest.
“This could lead to quality losses and possibly also to crop losses,” Fritsch said.
Conab anticipates a 6.6% decrease in Brazil’s Arabica crop compared to the previous year.
Colombia, the world’s second-largest producer of Arabica coffee, is expected to see a decline in its coffee crop this year, according to the USDA forecast.
Robusta has become a much more affordable option compared to Arabica due to its steeper price drop, which may result in shifts in demand, according to Fritsch.
The price premium for Arabica over Robusta has rebounded to 80%, a significant increase from autumn 2024 when it was at times only 20%. This situation last occurred over two years ago.
Fritsch added:
The continued supply shortage of Arabica coffee should prevent prices from falling much further.
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