Dive Brief:
- The International Coffee Organization reported a 3.3 million coffee bag deficit for 2015/16, according to the organization's earnings report. This would be the second consecutive year that the organization reported an end-of-year deficit.
- The organization increased its estimate of global coffee output from 143.3 million bags to 148 million bags, a 0.9% upswing from last year's coffee production. Total exports from October to August were 1% lower than the same period of the previous year, at 102.8 million bags.
- The ICO composite indicator's daily price grew from $1.37 on Sept. 1 to $1.39 at the end of the month, resulting in a 5.5% higher average than August at $1.38. This is the highest daily price average since February 2015.
Insight:
Negative crop outlooks from top producers and the likelihood of a slowed Vietnamese coffee crop due to heavy rains have compounded deficit warnings. Because Vietnam is the largest robusta producer, concern about next year's supply has spiked the bean's prices, boosting the market 5.5% in September.
Brazil is also expected to experience a coffee exports slowdown due to recent drought, despite its weakened currency and high roaster demand. A 2014 drought in the South American country reduced Brazilian coffee production by close to 30% in the state of Minas Gerais, a major growing region.
Global warming has increased the frequency of heavy rains and drought in coffee growing regions according to a report from the Climate Institute of Australia, which will continue to cause coffee shortages. As coffee's popularity continues to increase, producers should think about new ways to grow and harvest the beans.