STiR coffee and tea magazine

26 STiR coffee and tea / Issue 6, 2019 (December / January 2020) G By Eugene Gerden Holding Back Holding Back Analysts predict a recovery of global coffee prices in 2020 due Analysts predict a recovery of global coffee prices in 2020 due to declining production and some hoarding in Vietnam to declining production and some hoarding in Vietnam lobal coffee prices may finally recover in 2020 from historical lows, providing relief to farmers in coffee producing nations, according to predictions of some traders, producers, the World Bank, and the International Coffee Organization (ICO). Harvests will be significantly lower than in coffee year 2018/19 helping stabilize the market. "World coffee production in coffee year 2019/20 is projected to be 0.9% lower at 167 million 60-kilo bags with a 2.7% decline in arabica output to 96 million bags, while robusta production is expected to rise by 1.5% to 72 million bags," according to ICO's October projections. ICO estimates a surplus of 4 million bags this year. This is the second consecutive year of oversupply with warehouses still bulging with 2.6 million surplus bags from 2018/19. The World Bank's Commodity Markets Outlook reports coffee prices are expected to stabilize in 2020, rising 2-3% following a projected decline of 13% in 2019. In coffee, global prices for arabica were up 4% during the quarter ending September and are now 5% ahead of last year. In contrast, robusta prices are down 11% compared to third quarter 2018. According to traders, declining production in both Vietnam and Brazil could support prices hovering around $1.06 a pound. The threshold varies by country but local farmers in most producing countries need prices of $1.20 to $1.50 per pound to show a profit. Holding back In response to nine-year lows, Vietnam's robusta growers are hoarding supplies in hope of better returns. In September Le Tien Hung, c.e.o. at Vietnam's No. 2 exporter Simexco Da- klak, surveyed growers to discover they were sitting on 85,000 metric tons of beans or 5% of the coffee crop. Robusta futures are down 14% due to plentiful supplies and many fear prices will go even lower. "We dare not to sell more at this point as we may not gather enough sup- plies," Hung said. "Several traders have wrestled to fulfill their October contracts." Vietnam exported 1.54 million 60-kilo bags in September, down 19% from August. Low- er prices are encouraging farmers to switch to more profitable crops, said Hung. Coffee pro- duction in Asia will increase a modest 1.9% with Vietnam steady, according to traders from Dmitry Patrushev, Russia's Minister of Agriculture

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