Coffee production forecasts for Brazil, Central America, Vietnam and Indonesia are all down.

According to Reuters in early July, Brazil’s coffee output for the 2013/14 crop year was only 49.9 million bags, lower than the initial estimate of 53.5 million bags, of which Robusta coffee only reached 13 million bags due to dry weather at the beginning of the year. When frost was forecast to occur in the Parana region in mid-July, the 2014/15 coffee output in this region was reduced by about 20%. Accordingly, due to the impact of frost on branches and leaves, the tree will focus on nourishing branches and leaves, so the tree will not have enough nutrients during the flowering process. Moreover, due to low coffee prices, farmers also limit their investment in fertilizer. Coffee prices in London and New York rose to $1,970/ton and 134 cents/lb for the September contract. But then frost did not occur as expected and the Brazilian Real devalued against the US dollar (1 USD for 2.3 Real) causing coffee prices to turn around and decrease to $1,865/ton for Robusta coffee on the London exchange and 115.60 Uscent/lb for Arabica coffee on the New York exchange.

In Central America, due to the impact of rust spreading throughout the region, the coffee output of this region decreased by 15% to only 17.3 million bags. Rust not only affected the 2013/14 crop but also affected the following few crops due to the weakening of coffee trees. Mexico’s output also decreased by 10% due to the fungus.

Indonesia is currently in the harvest season (this year Indonesia harvests 1 month later than usual). However, continuous rains are occurring in the main coffee growing area of Sumatra, forcing farmers to stop harvesting. Indonesians mainly use drying yards to dry coffee, so the wet weather will cause the coffee beans to rot and turn black, affecting the quality and yield of coffee. This year’s coffee output is forecast to reach only 9.58 million bags, down from 11.04 million bags last year. This year’s exports are also forecast to reach only 6 million bags (60Kgs), the lowest level in the past 6 years. Domestic consumption in this country is increasing because young people now prefer to drink coffee, so this year’s exports are forecast to decrease by 19% to only 6 million bags.

In Vietnam, the drought and hailstorms in June in the Central Highlands caused 5,000 hectares of coffee to be completely lost and about 27,000 hectares to be severely affected, so the output of the next crop will decrease by 15% compared to the 2012/13 crop, reaching only 1.2 million tons. The prolonged drought also caused the outbreak of rust disease in Lam Dong province. This is the second consecutive crop failure in Vietnam. Vietnam’s exports in July are estimated to reach only 90,000 tons, down 21.3% compared to the same period last year. Vietnam’s exports are expected to continue to decrease in August and September.

Thus, the global supply of the 2013/14 crop will decrease by 8 to 9 million bags compared to the previous forecast, so coffee prices in the coming time will be affected by this fact.

Currently, Robusta coffee inventories on the Liffe exchange have fallen to their lowest level since May 2009 due to the high premiums on Vietnamese and Indonesian coffee used as raw materials for blending, causing traders to buy more from the Liffe London exchange. Specifically, this inventory as of July 25 is 98,250 tons.

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