Coffee price to remain high in 2015: Rabobank

Rabobank has predicted that coffee supplies will remain low next year and price level will remain strong, in its 2015 Commodity Outlook, released this week. Rabobank predicts a second year of deficit production for Arabica, coupled with a balanced Robusta market, encouraging high prices throughout next year. Rabobank says Brazilian production remains the key price driver, and many uncertainties remain regarding the potential for the next crop. “The severe drought that affected Brazil’s main Arabica growing regions during 2014 not only influenced the development of coffee beans, but also the trees’ vegetative growth,” said Rabobank. “As a result, productive branch growth is less than ideal, reducing the potential number of internodes, which would eventually develop into flowers and later on into cherries.” Rabobank predicts Brazil will produce a maximum of 47 million bags and a minimum of 42 million bags. The bank reports that Robusta areas in Brazil were hardly affected by the drought and production should see a modest 2.6 per cent growth in 2014-15, over the previous year. Rabobank is skeptical of other coffee growing regions capacity to compensate for Brazilian losses in the Arabica market. Despite its estimate that Colombia will produce 12.8 million bags, the bank cautions the extra Colombian coffee will not be enough to drop prices. Regarding demand, Rabobank expects coffee consumption to increase by 2.2 per cent, in line with the long-term average. It says Arabica consumption will slow, growing at just 1.1 per cent while Robusta consumption will grow by 3.6 per cent in 2015. The banks says roasters will increase the percentage of Robusta they use in their blends next year. Rabobank says Vietnam is heading towards another bumper crop and should get close to matching its 2013-14 record season, while India and Indonesia should recover after disappointing crops. Rabobank has warned traders to consider key variables to watch in the year ahead, including increasing US dollar strength and a deterioration of Brazil’s economy.