Coffee Prices Projected Desember 2015 : Arabica coffee futures fell to their lowest since January 2014, when the market first started to rally on the unprecedented drought in Brazil that hurt last year's production.
Prices extended losses well below their 100-day moving average as top grower Brazil harvested. In a report, Rabobank held its April forecast for Brazil's 2015/16 crop steady at 48.5 million bags.
It pegged global output at 150.4 million bags in 2015/16 from 142.7 million this year. Still, the bank increased its global deficit estimate in 2015/16 to 1.9 million bags from the 1.5 million pegged in April. December arabica coffee closed down 1.15 cents, or 0.9 percent, at $1.2055 per lb after touching $1.204.
November robusta coffee closed down $12, or 0.7 percent, at $1,615 a tonne. Cocoa futures were higher, with New York December ending up $210, or 0.7 percent, at $3,108 a tonne. December London cocoa closed up 8 pounds, or 0.4 percent, at 2,062 pounds a tonne.
Coffee fundamentals have "become more bullish" despite the gloomy macroeconomic environment, Rabobank has said, as it raises its forecast for the size of the global coffee deficit.
Arabica prices could rise to 140 cents a pound by the end of this year, the bank said in its latest coffee market outlook, while disappointing weather in the world's largest producer Brazil could push prices even higher.
Deficit raised
Rabobank raised its estimate of the 2014-15 coffee deficit, the extent to which consumption outpaces supply, to 6.9m bags, from 6.7m bags, due to a disappointing Peruvian crop.
The bank also raised its forecast for next season's deficit to 1.9m bags, citing growing demand in Europe and expectations for a "moderate" crop in Vietnam.
But the bank noted that this estimate is based on normal weather.
"If rains are erratic, Brazil will find itself unable to produce near its potential next year, which could turn the market into a very bullish mood and push prices beyond 140 cents a pound," Rabobank said.
Bumper crop hopes
Thanks to a mild winter and the low value of the Brazilian currency, which makes coffee exports more profitable, markets are expecting a bumper crop next year.
"But we believe the weather— and especially the consistent return of the rains—is still the main ingredient in a Brazilian arabica bean," Rabobank said.
Rabobank also reports that Brazilian farmers have bridged the 2014-15 coffee deficit destocking, but warns that "the market will either have to have an upward correction or have stronger differentials, especially in Brazil, in order to incentivise farmer selling through 2015-16".
Demand rises
And Rabobank sees demand stronger than expected, with disappearance in the EU "surprisingly strong" in the three months to June 31, at 11.8m bags, up 2.7% year on year.
The bank also reported strong demand in Switzerland and Norway, with no sign of a fall-off in Russian imports despite the weak rouble.
Rabobank calculates that 1.75m bags more of coffee were consumed in non-producing countries in the six months to June 2015, compared with the same period a year ago.
Conversion ratio disappoints
Rabobank kept its forecast for 2014-15 Brazilian arabica production at 32m bags, with robusta production at 16.5m bags, lower than average trade expectations, citing low conversion ratios, the proportion of coffee cherries that yield beans.
"The news that conversion ratios from cherry to green bean are less than perfect in Brazil have been around since the start of the current harvest," said Rabobank.
"But as these tend to improve as the harvest progresses, only when more than half of the harvest was collected did it become obvious that the average conversion ratio would not improve enough to match the average of a normal year," Rabobank said.
Currency effect
But Rabobank noted that production in Brazil is set to rise in the longer term thanks to good markets.
The falling value of the Brazilian real against the dollar has left the country with a very low cost of arabica production, which will prompt Brazilian farmers to expand future production.
"With a total capacity of about 62m bags, sooner or later within the next two years, Brazil is likely to flood the global market with coffee," Rabobank said.
Prices extended losses well below their 100-day moving average as top grower Brazil harvested. In a report, Rabobank held its April forecast for Brazil's 2015/16 crop steady at 48.5 million bags.
It pegged global output at 150.4 million bags in 2015/16 from 142.7 million this year. Still, the bank increased its global deficit estimate in 2015/16 to 1.9 million bags from the 1.5 million pegged in April. December arabica coffee closed down 1.15 cents, or 0.9 percent, at $1.2055 per lb after touching $1.204.
November robusta coffee closed down $12, or 0.7 percent, at $1,615 a tonne. Cocoa futures were higher, with New York December ending up $210, or 0.7 percent, at $3,108 a tonne. December London cocoa closed up 8 pounds, or 0.4 percent, at 2,062 pounds a tonne.
Coffee fundamentals have "become more bullish" despite the gloomy macroeconomic environment, Rabobank has said, as it raises its forecast for the size of the global coffee deficit.
Arabica prices could rise to 140 cents a pound by the end of this year, the bank said in its latest coffee market outlook, while disappointing weather in the world's largest producer Brazil could push prices even higher.
Deficit raised
Rabobank raised its estimate of the 2014-15 coffee deficit, the extent to which consumption outpaces supply, to 6.9m bags, from 6.7m bags, due to a disappointing Peruvian crop.
The bank also raised its forecast for next season's deficit to 1.9m bags, citing growing demand in Europe and expectations for a "moderate" crop in Vietnam.
But the bank noted that this estimate is based on normal weather.
"If rains are erratic, Brazil will find itself unable to produce near its potential next year, which could turn the market into a very bullish mood and push prices beyond 140 cents a pound," Rabobank said.
Bumper crop hopes
Thanks to a mild winter and the low value of the Brazilian currency, which makes coffee exports more profitable, markets are expecting a bumper crop next year.
"But we believe the weather— and especially the consistent return of the rains—is still the main ingredient in a Brazilian arabica bean," Rabobank said.
Rabobank also reports that Brazilian farmers have bridged the 2014-15 coffee deficit destocking, but warns that "the market will either have to have an upward correction or have stronger differentials, especially in Brazil, in order to incentivise farmer selling through 2015-16".
Demand rises
And Rabobank sees demand stronger than expected, with disappearance in the EU "surprisingly strong" in the three months to June 31, at 11.8m bags, up 2.7% year on year.
The bank also reported strong demand in Switzerland and Norway, with no sign of a fall-off in Russian imports despite the weak rouble.
Rabobank calculates that 1.75m bags more of coffee were consumed in non-producing countries in the six months to June 2015, compared with the same period a year ago.
Conversion ratio disappoints
Rabobank kept its forecast for 2014-15 Brazilian arabica production at 32m bags, with robusta production at 16.5m bags, lower than average trade expectations, citing low conversion ratios, the proportion of coffee cherries that yield beans.
"The news that conversion ratios from cherry to green bean are less than perfect in Brazil have been around since the start of the current harvest," said Rabobank.
"But as these tend to improve as the harvest progresses, only when more than half of the harvest was collected did it become obvious that the average conversion ratio would not improve enough to match the average of a normal year," Rabobank said.
Currency effect
But Rabobank noted that production in Brazil is set to rise in the longer term thanks to good markets.
The falling value of the Brazilian real against the dollar has left the country with a very low cost of arabica production, which will prompt Brazilian farmers to expand future production.
"With a total capacity of about 62m bags, sooner or later within the next two years, Brazil is likely to flood the global market with coffee," Rabobank said.
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