Coffee prices marked a surge, with U.S. Coffee C futures rising from the level of $94.50 (day’s low on 8th March) to the current high of $98.30 as on 11 March’19 amid concern over the production loss as Brazil, the major exporter of Arabica coffee enters an “off-year” output season in the period from 2019 – 2020.
The prices which plunged previously over the high production estimation for the period 2018 – 2019 amid high Brazil export due to favoured weather, found support near the bottom level of approx. $94.50. The Parana and the southeast of Minas Gerais enters an “off-year” of the biennial production cycle, and the majority of high output is already in the supply chain, which in turn supported the falling coffee prices.
The primary gains in the coffee prices were mainly currency driven, with Brazilian Real (BRL) appreciating from the level of U$0.2562 (which marked a day’s low on 7th March) to the level of U$0.2597 (day’s high on 8th March). The appreciated Brazilian currency supported the Arabica prices (ICF), which soared from the level of U$109.30 (day’s low on 7th March) to the present level of U$111.50.
The higher Brazilian dollar impacted on the depreciating US dollar and supported the coffee prices.
The other factor which supported the falling coffee prices is the higher import estimation from the U.S. and Europe, which is forecasted to jump by 2.1 million and 1.1 million bags respectively in the current year. The total world import is expected to mark a slight surge from the level of 163,218 thousand (60kg bag) in June 2018 – 2019 to 163,589 thousand (60Kg bag) in the period of December 2018 – 2019.
As per the report from the Global Agricultural Information network, coffee continues to grow in popularity in China, though tea remains the traditional drink. The coffee is gaining popularity in urban areas of China and among young professionals.
The rising trend in the coffee consumption in China, which is relatively low as compared to U.S., Europe, and Japan, provided impetus to the coffee outlets, such as Starbucks to tap in the China market and currently, Starbucks is expanding in China, over the changing trend in China Coffee consumption. Starbucks first opened in Beijing in 1999 and then expended to Shanghai and other first-tier cities, which was in line with the gaining popularity in urban areas. The company plans to operate 6,000 stores in 230 cities, over the optimism on changing coffee consumption trend.
Starbucks massive investment in the centralized locations within China provided an impetus towards the development of China’s coffee consumption popularity and consumption. The 30,000-square-foot Reserve Roastery in Shanghai is meant to showcase the coffee culture and promote coffee consumption in the China market. As per Euromonitor International, Starbucks controls almost 60% of the coffee chain in the China market.
The rising trend in coffee consumption in China, along with concerns on supply disruption from Brazil, and appreciating Brazilian Real supported the coffee prices, and it marked a surge on the various international commodity exchange.
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