Prepare For A Very Bumpy Year For Coffee – CoffeeTalk

In 2025, the supply-and-demand balance of key commodities can swing from oversupplied to massively in deficit, depending on unpredictable politics. The OPEC+ oil cartel is on the ropes, with global oil demand growth expected to reach around one million barrels a day, lower than expected output growth from non-OPEC+ countries. Trump could alter the equation by tightening American oil sanctions on Iran and Venezuela, which could derail economic growth. If the incoming US president hits Tehran and Caracas, Saudi Arabia can use the opportunity to hike production. Otherwise, there is no space for extra Saudi crude.

Trump can create trouble for OPEC+ via two policies: his threat of a trade war with Canada, Mexico, the European Union, and China, that could derail economic growth, and loosening regulations for American drilling. Trump has insisted his top priority is lower energy prices and more US oil and gas production, so, on balance, OPEC+ is likely to struggle. With Brent trading close to $70 a barrel, oil is not the easy short it was when it was close to $100 a barrel.

British oil major BP Plc is also on the ropes, with its market value declining to about $75 billion at current prices. The company’s strategic update in early February will put the spotlight on two negatives: BP will effectively issue a profit warning, and share buybacks are likely to be lowered to protect the balance sheet. Lower earnings and a smaller share repurchase could kill investor appetite for the stock, however, and open the door for a corporate deal.

Watching OPEC+ and BP will require a steady supply of coffee, as Brazil and Vietnam, the world’s top producers of the Arabica and Robusta bean varieties, face a crop shortfall. This could be the fifth consecutive season where coffee consumption surpasses production, which is unprecedented. Coffee traders believe that if the Brazilian crop doesn’t recover, prices may need to climb from about 350 cents a pound currently to somewhere between 400 cents and 500 cents. Coffee roasters will in turn raise retail prices, particularly for the espresso made from Arabica beans.

Coal is another commodity that receives less attention despite its still-huge importance to the energy system and the fight against climate change. In 2024, the world consumed a record amount of coal, and 2025 will be a pivotal year to see whether a change of trend occurs. China has adopted coal as the cornerstone of its energy system, with renewables as a complement. The Asian nation alone consumes 30% more coal than the rest of the world altogether, endangering any progress to stop global warming.

Iron ore is another raw material often overlooked but crucial for the profitability of global mining groups and steelmakers. Its price has dropped to $100 per metric ton now from more than $200 in 2021. The new year could mark an inflection point for the commodity, with Chinese steel production probably reaching its zenith between 2022 and 2024. Crucially, iron-ore supply is going to increase next year, including from Guinea in West Africa. Lower prices beckon in 2025.

Read More @ Bloomberg