Coffee Prices Explained: A Beginners Guide to Green Coffee Prices

Coffee at the Kenya Exchange

Market Participants

Bidding on Coffee at the Kenya Coffee Exchange in Nairobi

Price Volatility & Its Impact

Differentials

Tracking Price Differentials
Frost in Brazil — July 2021
  1. The underlying world coffee price — as quoted by the relevant futures exchange
  2. Its differential price — as determined by country specific factors

Volatility and Market Movements

Coffee Market prices 1979–2021
  1. Drought, followed by frost, followed by potential additional drought in Brazil: after two back to back episodes of frost in July, the country is now awaiting rainfall from September to November in order to bring about blossoming. Parts of the arabica growing regions in Sul Du Minas and Mogiana were already impacted by a harsh drought which began from October last year impacting the current crop (which has now finished it’s harvest period), while the damage caused by frost has had an impact on the coffee trees that will be harvested in May next year. The damage from the frost can be very visible immediately as farmers usually start to prune and stump severely impacted trees. However, in the medium term the total damages of both drought and the frost combined are noticeable only after the flowering occurs — which may see further pruning and tree stumping taking place if the blossoms fail. Brazil now needs good rains to end November. Without rains to encourage flowering and then also timely follow up rains to “set” the flowering, coffee agronomists expect a serious loss to next year’s harvest potential, which is an “on-cycle” crop. The more erratic the rainfall the poorer the flowering and ‘set’, and hence the more volatile the upcoming price movements.
  2. The adverse weather situation in Colombia: As the second largest producer of Arabica coffee worldwide, Colombia is facing a complex situation — somewhat opposite to that in Brazil’s arabica growing regions. The weather across Colombia’s coffee growing regions have faced above average rainfall preventing adequate heat stress on the trees which is requisite to a good flowering. Less flowers essentially mean less cherries. Added to the internal crisis that the country experienced some months ago, where strikes and road closures affected coffee exports, disrupted and reduced coffee supply feeds price volatility.
  3. Mild Arabica deficit overall: Many East-African and Central American coffee producing origins have seen little investment in production over the past three years due to years of low coffee prices. This, together with off-cycles in several origins, will result in a statistical deficit of Mild Arabica in the coming season.

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