Strong demand affects Cooperative Bank to raise shortage forecast of coffee market

Agrimoney.com reported on May 22nd that the latest report from the Dutch Bank of Cooperation (Rabobank) raised its supply shortage forecast for the global coffee market in 2008 by 1 million packets (60 kg each), mainly due to the influence of strong demand. The bank also said that given the upward forecast for supply shortages in the coffee market, coffee prices would be more sensitive to weather conditions in Brazil, the largest producer, and that coffee prices could rise if there were adverse weather conditions in Brazil. The price of coffee futures in New York recently hit an 11-month low as news of a corruption investigation against Brazil's president hit the Brazilian currency.

Coffee prices are still likely to fall in the near future, as funds are still mainly on the seller's side, and the exchange rate of the Brazilian dollar will remain a negative factor in the short term, the Cooperative Bank reported. However, the bank also noted that demand in the global coffee market was strong, raising its coffee demand forecast for 2016 and 2017 by 700000 to 156.2 million and 1.4 million to 159.8 million respectively. In this context, coffee prices are expected to be sensitive to weather conditions in Brazil, including the possible threat of frost in southern Brazil in the near future, but the bank believes that the weather during the September-October flowering season will most likely stimulate a rise in coffee prices.

According to the latest estimate of the Cooperative Bank, the supply shortage in the global coffee market will reach 6.8 million packets in 2017, global coffee production is estimated at 153 million packets, and coffee production in Brazil, the largest producer, is estimated to be 49.2 million packets, a decrease of 4.8 million packets compared with the previous year, because the new year of Brazilian coffee will be the low-yield year in the two-year crop cycle, but this is higher than the 45.6 million packets estimated by the Brazilian Ministry of Agriculture.

In its monthly report, the International Coffee Organization (International Coffee Organization, ICO) said the composite average price of ICO coffee fell 2.7 per cent to 130.39 cents a pound in April, a nine-month low, mainly due to speculative selling by hedge funds. Compared with the price at the beginning of the month, the comprehensive average price of ICO coffee fell by 6.9% at the end of the month. The report said that in the first half of 2016.10-2017.03, the global coffee market was well supplied, with global coffee exports growing by 4.8 per cent a year to 60 million bales. In the absence of significant fundamental changes, the global coffee market is expected to remain generally positive in 201718.

ICO said coffee prices fell significantly in the second half of April, including growth in global coffee exports, an increase in coffee stocks in major consumer countries and selling of hedge funds. In addition, the overall commodity market environment is not good, with most commodity prices falling, whether agricultural or non-agricultural commodities. In terms of coffee exports, Brazilian coffee exports increased by 2.4% in the first half of 2016, while Colombian coffee exports increased by 10.3%. By the end of March, U.S. coffee stocks had reached 6.7 million packets (60 kilograms each), the highest level since 1994.