Coffee prices has been falling with benchmark US Coffee C futures trading downwards from its 25th January 2019 day’s high of $107.15, to mark a day’s low of $93.60 on 26th February 2019 amid forecast of rising production.
As per the United States Department of Agriculture, world coffee production is forecasted to record a high-level production of 174.5 million bags, up by 15.6 million from the previous year production of 158.9 million bags.
The increased estimate by the U.S. Department of agriculture was in the wake of high Brazilian Arabica production, which is estimated to increase by 8.4 million bags as compared to the previous season production of 46.9million bags.
The 80% of Brazilian production is coming from the region, where trees are in the on-year of the biennial production cycle. A fall in production from Parana and the southeast of Minas Gerais is expected as the trees in the region are in the off-year of the biennial production cycle. However, the drop is expected to be less intense than average. Thus, the Brazilian arabica is all set to enter the global market in the coming season.
Brazilian Robusta coffee production is forecasted to grow continuously from 12.4 million bags to 16.5 million bags this season, as pleasant temperature and abundant rainfall boosted yield in the state of Espirito Santo, Rondonia, and Bahia.
The combined production of Arabica coffee and Robusta Coffee is forecasted to increase by 12.5 million bags from 50.9 million bags last season.
The other major coffee producer, Vietnam’s production is forecasted to increase by 1.1 million bags to reach a level of 30.4 million as cool weather and off-session raining helped in stimulating the coffee trees before the flowering and cherry-setting. The 95% of the production is expected to be Robusta and export, and domestic consumption is expected to rise on higher available supplies.
Colombia’s production is expected to increase by 500,000 bags this yearto mark a level of 14.3 million bags as favorable growing conditions and improving yields is expected to support the production.
Indonesia’s production is also expected to increase by 500,000 bags this year to mark a level of 10.9 million bags. On account of favourable growing conditions in the lowland area of Southern Sumatra and the Java, Robusta coffee production is expected to reach a level of 9.7 million bags and Arabica production is expected to mark a level of 1.2 million bags. The region which experienced heavy rainfall during fruit development will mark a decline in production. However, the production gain from the main growing region, Northern Sumatra is expected to offset the production loss from those regions.
On the supply side, the import from the European Union is expected to increase by 1.1 million bags to mark a level of 48.5 million bags. However, the ending stock for the European Union is expected to be stood at 13.8 million bags during the end of the season.
The United States imports are expected to increase by 2.1 million bags to mark a level of 26.5 million bags, and the ending stock is expected to be stood at 6.8 million during the end of the season.
In a nutshell, global production is expected to rise. However, the consumption increase is expected to support the price of coffee. The market participants will be eyeing on weather change, and rainfalls level on the production areas to further gauge the price direction and reckon the production estimation of 2019 on various levels.
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