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Coffee deficit could see arabica prices rise nearly 25% by end the of 2019

Lower coffee yields in Brazil’s ‘off-year’ production cycle could provide some relief to coffee farmers struggling with record low commodity prices

Brazil’s huge annual coffee harvest of around 2.6 million tonnes is perceived as a key barometer for global commodity prices

A global coffee deficit of one million 60-kg bags will contribute to arabica prices rising 24.8% by the end of 2019 according to a new forecast. The Reuters poll of prominent analysts and traders found most expect arabica producers in Brazil, the world’s largest coffee producers, to yield 55 million bags in 2019/20 – a decline of of 8.3% from the previous harvest.

Brazil’s huge annual coffee harvest of around 2.6 million tonnes is perceived as a key barometer for global commodity prices. The Latin American nation’s estimated 4.25 million bag surplus for the 2018/19 harvest was a major contributor to 13-year low arabica prices of 92 cents per lb in September 2018. Record low prices have presented a serious predicament for many coffee farmers who have been unable to meet basic production costs.

“Arabica prices should find some support by the fact that 2019/20 is set to be an ‘off year’ output in Brazil,” said Caroline Bain, analyst at Capital Economics.

Coffee farmer profitability has risen to global prominence in the last 12 months. Record low commodity prices have driven many farmers into poverty, with many giving up coffee in favour of more lucrative crops, such as avocado, or abandoning their farms altogether. In September 2018, the World Coffee Producers Forum, which represents producer associations from Colombia, Brazil, India, Africa and Central America, made a direct plea to roasters and consumers to tackle unsustainable coffee prices that are damaging producer communities.

The same month, the world’s largest coffee shop chain, Starbucks, became the most high-profile firm to respond to the issue, committing a $20m relief package to subsidise its Central American smallholder suppliers in Nicaragua, Guatemala, Mexico and El Salvador. Around the same time, fellow US coffee chain, Dunkin’, announced a $2m financial contribution and five-year agreement with World Coffee Research (WCR) to boost coffee farm climate resilience and profitability.

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