Plunging coffee bean prices could drive grower cutbacks
It’s been a big year for the companies that sell coffee, but not so much for the growers who supply them. That could start to change in 2019.
Historically low prices for coffee beans in 2018 will likely reduce the incentive for farmers to expand supplies, said Rodrigo Costa, the United States-based coffee director for Brazilian trading company Comexim. That could mean a price spurt ahead, analysts say, as major moves within the industry promise to boost consumption worldwide.
Coca-Cola, for instance, spent US$5 billion in 2018 to get into the java space. Meanwhile, Nestle SA made its third-largest deal in 152 years when agreeing to pay US$7.15b for the right to market products from Starbucks, which is now expanding in China at a rate of a new store every 15 hours as demand in the world’s secondlargest economy booms.
‘‘You can’t have everybody in the chain winning at the same time,’’ said Lucio Dias, commercial director at Cooxupe, the world’s largest coffee growers’ cooperative. ‘‘Now, it’s been the time of the industry.’’
Next year, he and others say, the growers may get a bigger piece of the action.
Coffee futures are forecast to average US$1.24 (NZ$1.85) a pound in 2019, according to the mean estimate of eight analysts surveyed by Bloomberg. That’s up from US$1.15 a pound this year, which is below the past fivedecade average price.
That will come as consumption has increased by an average 3.6 million bags a year since the 2014-15 season, according to the US Department of Agriculture.
It’s been a tough 2018 for farmers. Prices for arabica coffee beans, the type favoured by Starbucks, fell about 20 per cent this year in New York, touching the lowest level since 2006.
Global coffee output in the current season was estimated at a record 174.5 million bags, up 15.6 million from the previous year, also reflecting output increases in Colombia and Vietnam, the USDA said. Ending stocks are seen rising by a quarter to a fouryear high. – Washington Post