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Coffee prices fall as demand slides

The price of coffee rose sharply at the end of 2019 with news that the world’s biggest suppliers, Vietnam and Brazil, were set to cut supply in the coming year.

Coffee prices rose at the end of 2019 with news that its two largest producers would cut supply.

A mere two months later however, the Nikkei in its commodities reports indicates that the effects of the coronavirus have meant that the price of beans has been weakened by falling demand.

Consumers are staying away from coffee shops. China, which is the biggest importer of coffee beans, and also where the coronavirus outbreak started last December, has seen a significant cut in demand.

The Nikkei reports that Starbucks has closed more than 2,000 outlets in China, where coffee is mostly consumed in cafés.

Starbucks closed more than 2,000 outlets in China where the majority of infections are.

The Exchange news site noted that at month end February benchmark Arabica coffee futures were traded at around 120 cents per pound on the New York Mercantile Exchange, more than 10 per cent  lower than early December last year when futures prices jumped to 135 cents per pound.

Complicating the problem is an expected big crop from Brazil this year which will likely lead to oversupply.

Analysts at the Nikkei noted that before the coronavirus outbreak, the US Department of Agriculture had forecast that China’s coffee consumption would jump 51 per cent to 3.3 million 60 kilogramme bags of coffee between September 2014 and September 2020. The spreading virus, now in more than 120 countries, has affected this forecast. 

Japan, Jamaica’s biggest buyer of Blue Mountain coffee and the world’s fourth-largest consumer of coffee beans, with an estimated consumption of 8.1 million 60kg bags in the year to September 2020 is also downgrading its forecast. Analysts say the market will be affected by falling tourist arrivals and the closure of hotels, restaurants and cafes.

Jamaica’s Blue Mountain Coffee is primarily consumed by Japan.

Overall, coffee consumption is expected to fall globally. Vietnam, which is also projecting a big crop, will add to Brazil’s expected 67 million to 69 million 60kg bags of coffee in the coming year, exceeding 2019’s record 64.8 million bags in the year to September 2019, creating a surplus in the midst of falling demand.