Coffee is one of the most popular beverages in the world. Many people start the day with a cup of coffee or have one – or more – cups of coffee at the office as its caffeine content prevents the onset (or continuation) of drowsiness, while other consumers like to enjoy a cup of coffee when relaxing at home, or, with friends in a café or coffee shop.
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11 January 2021 (closed)
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Today's Headlines Coffee Price
Dry weather caused by El Nino is expected to lead to a ten percent decline in Indonesia's coffee production in 2016. El Nino, which occurs once every five years on average, involves periodical warm ocean water temperatures off the western coast of South America that can cause climatic changes across the Pacific Ocean, leading to severe droughts in key agricultural-producing countries in Southeast Asia, including Indonesia. The El Nino in 2015-2016 is the worst one in nearly two decades.
Apart from the Indonesian rupiah which has hit its weakest level since the Asian Financial Crisis 17 years ago, the ongoing El Nino (the weather phenomenon that brings drought to Southeast Asia) may be the strongest since 1997-1998. This means that output of agricultural commodities is to decline (but which should have a positive impact on prices). Coffee production in Indonesia is estimated to fall by seven percent to 581,000 metric tons in 2016 from an estimated 625,000 tons this year.
Indonesian coffee shipments to Europe have risen on the back of the weak rupiah and larger coffee harvest. Robusta bean exports from the island of Sumatra grew 22.1 percent year-on-year in June 2015. Meanwhile, European traders expect these strong shipments to continue into July. The Indonesian rupiah is the worst-performing emerging currency in Asia tracked by Bloomberg, weakening about 7.2 percent against the US dollar so far this year. The positive side of a weak currency is that the country's exports become more attractive.
Being one of the world’s leading producers of coffee beans, Indonesia may benefit from climate change that causes an eastward shift in the global coffee production over the next couple of decades. According to new research conducted by Colombia-based International Center for Tropical Agriculture, the global supply of arabica beans is threatened due to a two degrees Celsius temperature increase as well as changing rain patterns. Brazil, the world’s leading coffee producer, will be affected strongly by this climate change.
Indonesia’s coffee production may hit a record high in the 2015-2016 harvest season according to a Bloomberg survey. The survey suggests that Indonesian coffee output is to rise 18 percent (y/y) to 650,000 metric tons from 550,000 tons in the previous season. Reason for a good coffee harvest is favorable weather (rain) having boosted yields. Indonesia is the world’s third-largest producer and exporter of robusta. Also in other parts of the world coffee production is estimated to increase, hence potentially placing pressure on prices.
Sentiments on the global coffee market have turned around completely in 2014 as severe drought in Brazil in combination with high rainfall in Indonesia are expected to result in weak harvests, thereby reducing global coffee production and stockpiles, causing a significant price increase since mid January 2014. Both countries are vital for global coffee production. Brazil accounts for about half of the world's total arabica production, while Indonesia is a significant robusta-type producer.
Prices of coffee have surged 24 percent in 2014 as Brazil experienced the warmest January ever and the least rainfall in 20 years. Being a major arabica bean producer, Brazil's weather conditions particularly influence the arabica coffee price. The arabica coffee price has jumped 26 percent in seven trading sessions, the highest level since July 2000. Meanwhile, weather forecasts do not seem to indicate the arrival of a sufficient amount of rainfall in the remainder of February and March before the dry season kicks in in April.
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