World coffee prices suffered their worst month since at least 13 years, led by a 12.4% slump in prices of Brazilian natural beans, amid improved confidence in the South American country’s 2023 harvest prospects.
Coffee prices as measured by an International Coffee Organization index slumped by 10.6% month on month in October to 178.54 cents per pound.
The decline, which took prices to a 13-month low, was the fastest on records going back to 2010.
And it was led by Brazilian natural beans, which fell by 12.4%, their quickest rate of decline in six years, reflecting rains which have underpinned ideas of strong blossoming period in many major arabica-growing regions translating into large concentrations of developing coffee cherries.
‘Noticeably improved the outlook’
According to Commerzbank, the arabica market has suffered from “besides the current concerns about global demand amid significantly rising interest rates and energy prices… come under pressure from the supply side.
“The favourable weather in Brazil of late has noticeably improved the outlook for the upcoming crop season, this year’s crop having been negatively impacted by drought and frost.
“What is more, a weaker Brazilian real is increasing the incentive for exporters to export more coffee.”
This week, HedgePoint forecast that Brazil’s coffee production in 2023-24 could grow by up to 10% from the 60.2m bags estimated for this year, and likely supporting a world coffee production surplus.
“Initial crop estimates, while conservative, suggest a near double-digit increase from 2022-23, which would be a relief to the market after two consecutive years of shortfalls in supply,” HedgePoint said.
Output prospects had been helped too by the return to production of trees heavily pruned after the 2021 freeze which damaged their vegetation markedly in affected areas.
‘Very atypical temperatures’
The underperformance of Brazilian natural prices last month spurred a 17.5% collapse in their premium over robusta beans, to a 13-month low of 89.26 cents per pound.
Indeed, robusta prices proved, relatively, resilient in falling by 7.5% last month, amid lingering concerns over Vietnam’s nascent 2022-23 harvest, for which rains have now provoked some worries of a late quality decline.
Arabica futures, having also slumped last month, have shown signs of stabilising so far in November, and indeed for December stood 3.1% higher at 177.55 cents a pound in late morning deals in New York on Friday, amid reports of colder and drier weather in major Brazilian growing areas.
“There is no forecast for frost, but temperatures should reach slightly below 10°C in producing areas of Paraná, São Paulo and southern Minas Gerais,” said Somar Meteorologia, viewing such temperatures as “very atypical for the time of year”.
Over the next few days, “dry weather gains strength over Centre South Brazil”, the meteorological agency added, although foreseeing a return of rans around November 10.
Support for prices has also come from data showing exports from Honduras, Central America’s top coffee shipper, tumbling by 47% year on year in October to 42,850 bags.