16.6 C
New York
Wednesday, May 25, 2022

Coffee prices to rise but still set for annual decline

Coffee prices to rise but still set for annual declineLONDON: Arabica coffee prices should rise before the close of 2015 from current depressed values but remain below end-2014 levels, a Reuters poll of 17 traders and analysts showed on Friday.

Production was forecast to rise in 2015/16 in top grower Brazil, helping to cap any rebound in prices. A modest decline in prices was expected in 2016.

Arabica futures were forecast to finish the year at $ 1.43 per lb, according to the median forecast in the poll, up 18 percent from Thursday’s close but 14 percent below end-2014 levels. An average price of $ 1.40 per lb is expected in 2016.

Brazil is forecast to produce 49.0 million 60-kg bags of coffee in 2015/16, up from the International Coffee Organization’s estimate of 45.3 million bags for 2014/15.

“The recovery in Brazil has been faster than initially expected, more so in the arabica-producing states,” Carlos Ignacio Rojas of Asoexport said.

The potential for Brazil’s real currency to weaken further against the dollar could also limit the scope for any significant recovery in prices. “Should it remain weak, the upside to coffee prices will be tempered,” said Shawn Hackett of Hackett Financial Advisors.

A weak real has helped to maintain returns in local-currency terms for producers in Brazil at a time when dollar-denominated prices have been falling.

“Brazil could potentially become much more competitive in the future,” said Carlos Mera, analyst with Rabobank, referring to the weakening real. “Colombia should also benefit from a very weak peso.”

The price of robusta coffee futures was predicted to rise to $ 1,815 a tonne at the end of 2015, up 9 percent from Thursday’s close but 5 percent below the end-2014 level.

An average price of $ 1,825 was forecast for 2016. Vietnam, the world’s top robusta producer, is expected to produce 28.8 million bags in 2015/16, up from the London-based ICO’s estimate of 27.5 million bags for 2014/15.

Weather remains the big unknown factor. “It will be important to monitor El Nino drought potential in Central America, Colombia, Vietnam and Indonesia,” Hackett said.

“These regions have a history of production problems during El Nino years. Thus far, droughts are developing in all these regions so one should be on high alert for production downgrades.”

Colombia’s coffee regions have been drier than usual for weeks as an El Nino weather anomaly takes effect and the crop will see less rainfall from now until harvest time, agronomists said this month.

Copyright Reuters, 2015

Related Articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Stay Connected

11,302FansLike
12,893FollowersFollow
751FollowersFollow
- Advertisement -

Latest Articles

Popular Articles