Category Archives: Supply & Demand

New Year, New Content

Happy New Year Café Hound! In 2015 we are going to try to add some new content on the site for the first time in a while.

One element of the new content is going to explore various data sources and statistical techniques regarding aspects of the coffee industry. A quick and dirty preview to this exploration follows below.

Cafe Hound developed a way to download daily price data for Arabica and Robusta coffee taken from daily settling prices (in New York and London respectively) for futures contracts. The unit of measurement is U.S. dollars per pound. We use a website called Quandl.com  for the data. We use R as our data analysis software.

Prices for Arabica and Robusta Coffee

Prices for Arabica and Robusta Coffee

The overall trend line shows coffee becoming more expensive over the last fifteen years on average, although with a significant drop in price occurring after prices peaked in late August 2011.

Price Range: Arabica vs. Robusta

Price Range: Arabica vs. Robusta

Arabica coffee (starting in 2000) is three times more volatile than Robusta coffee in terms of price variance.

Now we will look at combined annual production of Arabica and Robusta coffee. This data was compiled with International Coffee Organization data that was manually inputted into a .csv file http://www.ico.org/new_historical.asp

Coffee Total Production by Year

Coffee Total Production by Year

Coffee Production by Type

Coffee Production by Type

International Coffee Organization data isn’t as precise as it could be but it allows us to understand that the increased global coffee production is being produced in countries that are capable of growing millions of bags Arabica AND Robusta coffee in any given year.

Coffee Production by Type and Country

Coffee Production by Type and Country

Increases in total production over the last few years appear to be driven by an increase in production from countries that are classified as producers of Arabica/Robusta and Robusta/Arabica coffee. In short, this means that countries that are producing both Arabica and Robusta coffee are responsible for driving the growth in global coffee supply. Specifically Brazil, Indonesia, and Vietnam appear to be increasing their share of global coffee production—likely focusing said production on the lower quality Robusta coffee.

That’s enough of a preview for now, but the basic takeaway from this information leads us to the conclusion that we should pay particular attention to the variables  affecting production from Brazil, Vietnam and Indonesia if we want to forecast annual coffee production. However, at this point we haven’t explored the factors driving price enough to fully understand what we should be observing. More questions than answers at this point –meaning MORE analysis and exploration to come! Enjoy the New Year and keep checking in for more here at cafehound.com

 

 

Market News: Crop Fears Drive Kenyan Coffee Prices

Source: Agrimoney.com

The coffee industry has been experiencing incredible upward pressures on ‘C Grade’ prices over the past year.  The specialty coffee market is facing even more acute pressures as demand surges and supply is scarce.  Nairobi’s Coffee Exchange illustrates the scenario playing out in specialty coffee hotspots globally with the recent sale of one 340kg lot of premium AA for $1,011 per 50kg bag (approximately US$9.20/lb) in country! Applying standard export mark-up premiums to such a large purchase, assuming a US specialty coffee buyer was interested, could fetch anywhere between $30-60 a pound for this same coffee by the time it retailed in the United States.

Agrimoney Article Begins:

Could coffee become more valuable than your average base metal?

It is beginning to look that way – at least for top quality arabica beans in Kenya, where dry weather has dashed hopes of a production rise this season.

A lot of premium AA grade coffee sold at the Nairobi Coffee Exchange on Tuesday for $1,011 per 50kg bag, 40% higher than it was achieving last month.

The 340kg lot originated from a central Kenyan growers co-operative, Kiomothai, and was bought by East African specialist C Dormans, which sells to foreign markets besides running a chain of Kenyan coffee shops.

Dornams paid the equivalent of more than $20,000 tonne, making the coffee more than twice as expensive as copper, and approaching the levels that the likes of aluminium, nickel and tin trade at.

‘Outlook robust’

The price reflected the dearth of high quality beans for sale, Daniel Mbithi, a Nairobi Coffee Exchange official, said.

“There is no coffee and the market is grabbing the few available offers,” he told Reuters, the news agency, adding that “the price outlook remains robust going into the coming weeks”.

“Supplies remain tight.”

Production downgrade

Kenya, unlike some other African countries, has suffered poor coffee growing weather with unusually late and heavy rains early in 2010 damaging flowering before dry conditions later in the year damaging yields of fruit which did set.

The Kenya Coffee Board on Monday cut to 40,000 tonnes its forecast for the country’s coffee output in 2010-11, from a previous forecast of 49,000-55,000 tonnes, and leaving the crop on track to fall short of the previous season’s output of 45,000 tonnes.

The influential International Coffee Organisation last week lifted its estimate for world coffee production this season citing better weather in many major African producing nations, with the likes of Ethiopia, Tanzania and Uganda enjoying improved conditions.

In New York, arabica futures for March delivery stood 1.0% higher at 234.60 cents a pound, equivalent to $5,172 a tonne, at 11:45 GMT