Global coffee production will exceed demand by the most in four years in the season started on Oct. 1, according to CoffeeNetwork, a unit of INTL FCStone Inc.
Coffee supplies will be 6.9 million bags bigger than consumption in 2012-13, reversing a shortage of 500,000 bags the previous marketing year, Andrea Thompson, the Belfast, Northern Ireland-based head of research and analysis at CoffeeNetwork, said in a report e-mailed today. That would be the biggest surplus since excess supplies reached 7 million bags in 2008-09, she estimates. A bag of coffee weighs 60 kilograms (132 pounds).
“Increased output in Latin America and the Brazilian 2012-13 ‘on’ crop mean a return to a notable world arabica production surplus,” Thompson said in the report, referring to higher output in top grower Brazil as trees there entered the higher-yielding half of a two-year cycle, or the so-called on-year.
The global surplus will be due mainly to arabica beans, with excess supplies of 5.6 million bags, according to the report. That’s more than four times the estimated robusta surplus of 1.3 million bags, Thompson forecasts. Global coffee production will climb to a record 149.5 million bags in 2012-13, up from 138.5 million bags a year earlier, she said.
Robusta coffee, which gained 6.3 percent last year, is likely to come under pressure in the first quarter as farmers in Vietnam, the biggest grower of the variety, sell their crop before Tet, the holidays that mark the country’s Lunar New Year, Thompson said. Beans will trade between $1,850 a ton and $2,000 a ton in the period, according to the report. The beans for March delivery were at $1,963 a ton by 12:14 p.m. in London.
Arabica coffee, which lost 37 percent last year, making it the worst performer of the Standard & Poor’s gauge of 24 raw materials, is likely to gain during the first three months of the year as investors focus on the Brazilian crop for 2013-14, when the trees enter the lower-yielding half of the cycle, she said. Prices may rise to $1.60 a pound in the first quarter, Thompson forecast. The beans for March delivery were at $1.483 a pound.