World Heads for Fourth Year of Shortages for Instant Coffee Beans

Volcafe Ltd., a leading coffee trader, predicts an unprecedented fourth year of deficits for robusta beans used in instant coffee due to dry weather in Vietnam. The crop potential for Vietnam is expected to be 24 million bags in 2024/25, the lowest in 13 years. Poor rainfall has caused irreversible damage to coffee blossoms, while lower fertilizer use and the expansion of durian trees have also impacted production. Volcafe forecasts a global robusta deficit of 4.6 million bags in 2024/25, smaller than the 9-million-bag deficit seen in the previous season.

Supply tightness has fueled a robusta rally this year, with futures traded in London surging to a fresh intraday high above $4,300 in late April. A solution to the current robusta deficit requires higher prices to pressure demand or prompt buyers to use more arabica coffee. The world is facing a shortage of the cheaper robusta variety as El Niño weather conditions continue to harm crops in Southeast Asia. Demand for robusta beans hasn’t weakened in emerging markets but is projected to slow once price increases are passed on. Industry demand has begun to move toward arabica beans in the last six months, but a bigger shift or more robusta demand destruction is needed to remove tightness.

Record exports from Brazil, the world’s second-largest robusta producer, offset the robusta supply shortfall in Asia, but output from the country is also expected to drop in 2024/25. Severe drought and heat waves last fall reduced crop potential. The supply outlook for the arabica variety is brighter, but the surplus has practically disappeared to just 700,000 bags as poor weather affects crops in Brazil, Vietnam, and Central America.

Read More @ Yahoo