Coffee futures showed signs of buoyancy on Monday, after a month which cash prices chalked up their biggest loss in 14 years, led by a 14.8% plunge in values of Colombian mild arabica beans.
New York arabica coffee futures for March stood up 0.5% at 163.40 cents a pound in early deals, looking for their positive session of the month.
London robusta coffee for March was 0.7% up at $1,859 per tonne.
The increases followed a mixed period for prices, which on International Coffee Organization measures plunged by 12.3% in November, their biggest fall since October 2008, with a particular dip in more expensive arabica beans.
Prices of all three arabica types – Colombian milds, other milds and Brazilian naturals – fell to 17-month lows on the ICO data, which are drawn from prices in the European Union and US.
Robusta prices also fell notably although, with a less significant fall of 10.1%, narrowed discounts to arabica beans.
Arabica vs robusta
November’s price decline came amid growing worries for world coffee consumption, stoked by economic downturn, with concerns particularly for higher-priced products.
Indeed, the ICO also reported a 10.9% surge year on year in global exports of soluble coffee in October, to 1.19m bags, compared with a 2.5% dip to 8.5m bags in shipments of green beans.
Soluble coffee’s particular reliance on robusta beans has been viewed as supporting outperformance by robusta futures, which on Monday stood at a discount to arabica of the equivalent of 79 cents a pound, from more than 120 cents a pound in October, on a most-traded-contract basis.
In Brazil, the discount of robusta beans to arabica ones narrowed on Thursday to R$341.23 per bag, a 14-month low, according to research institute Cepea.
‘Non-stop weather problems’
However, futures in both robusta and arabica beans have found some support in recent days from growing worries over prospects for Brazil’s 2023 harvest of both varieties, with ideas that weather and poor plant vigour have negated the boost from a strong blossoming period.
Analyst Maja Wallengren last week, following a crop tour, pegged next year’s Brazilian production at 50m-56m bags, well below the 68.25m bags expected by Rabobank.
“The 2023 harvest development in Brazil is once more showing a high negative impact of the ongoing weather problems that continues to effect coffee production across the vast majority of the Brazilian coffee growing regions,” she said.
The weather setback has “delayed both the recovery from the frost and drought damage which caused severe losses to production in the recently completed 2022 harvest.
“Brazil’s growers have had to deal with the non-stop weather problems from ongoing dryness and drought, hailstorms, intense cold weather, new frost damage in June-July of this year, hurricane-force winds, flooding and extreme heavy rains, and mass defoliation which left trees unusually weakened,” she said.
‘Entirely ignored by investors’
Arabica output will stage a “modest” 10-20% recovery in 2023, Ms Wallengren said, while adding that “the 2023 conilon-robusta harvest will cause a major negative surprise to the world coffee market.
“It is beyond doubt an extremely poor crop in development which at this point has been entirely ignored by the futures trade.
“The negative impact of multiple weather disturbances from late May through November is of such magnitude that it’s comparative to the big drought in 2014-15 which saw production in Espirito Santo,” the top robusta-producing stage, “cut short by a third.”
Sao Paulo-based merchant Escritorio Carvalhaes said that investors “abroad are becoming convinced that in 2023, Brazil, the largest coffee producer and exporter in the world, will not have a full crop.
“Brazilian coffee growers, who are already aware of this fact,” have been selling the “minimum possible” in expectation of a price rebound.