Coffee prices fell for the eighth straight month in October as global supply forecasts rose amid weaker economic conditions that clouded demand prospects. The International Coffee Organization Composite Indicator Price (I-CIP) fell 10.6% from September to 178.54 US cents per pound.
I-CIP began its slide in March, when it fell 7.6% to 194.78 US cents per pound. The downward trend continued throughout the year, with some slight upward fluctuations.
The United States Department of Agriculture (USDA) forecasts that coffee production for 2022/2023 will increase by 7.8 million bags over the previous year, for a total of 175 million bags. Brazil’s supply for the 2022/2023 marketing year (July-June) will be 64.3 million 60-kilogram bags, up 11% from the last harvest.
Coffee production is strong in other parts of the world. For example, in Vietnam, the world’s largest producer of robusta, favorable weather conditions helped boost yield for the 2021/2022 marketing year. Its coffee production for the 2022/2023 marketing year, however, could be slightly lower due to pressure from rising input prices.
In Ethiopia, coffee production for the 2022/2023 marketing year (October-September) is expected to reach 8.25 million 60-kilogram bags, with record exports of 4.72 million bags, according to the USDA.
Coffee prices peaked in February, capping 17 months of increases. I-CIP reached 210.89 US cents per pound that month. One of the factors driving up prices was lower supply from Brazil, the top producer, due to poor weather conditions in 2021.
While production is expected to improve, the Brazilian coffee industry faces other challenges. Reuters reports that coffee growers in Brazil have defaulted on their contracts for two years in a row. These flaws caused a drop in futures sales, opening the door for a price spike, according to the report.
In addition to increased supply, global economic conditions and fears of recession could lead to lower demand in the coffee industry.
“While we expect supply-side conditions to improve, in summary, we see global coffee production increasing by 4.1% in 2022/23 to start to weigh on prices, as we consider the factors demand-side as the primary cause of lower prices in the near term,” financial services firm Fitch Solutions noted in an August 2022 report.
Through 2026, Fitch Solutions predicts that global production will exceed global demand. It forecasts global production to grow at a compound annual growth rate (CAGR) of 2% and consumption to grow at a CAGR of 1.7%.