The price of coffee declined for the eighth consecutive month in October, as the global supply forecast trended up amid weaker economic conditions that dampened the demand outlook. The International Coffee Organization Composite Indictor Price (I-CIP) fell 10.6% from September to 178.54 U.S. cents per pound.
The I-CIP began its slide in March, when it dropped 7.6% to 194.78 U.S. cents per pound. The downward trend has continued throughout the year, with some small upward fluctuations.
The United States Department of Agriculture (USDA) forecasts coffee production for 2022/2023 to increase 7.8 million bags from the previous year, totaling 175 million bags. Supply from Brazil for marketing year 2022/2023 (July–June) will be 64.3 million 60-kilogram bags, up 11% over the last crop.
Coffee production is strong in other regions around the world. For example, in Vietnam, the world's largest robusta producer, favorable weather conditions have helped increase yield for the marketing year 2021/2022 . Its coffee production for marketing year 2022/2023 could be slightly lower, however, due to the pressure of rising input prices.
In Ethiopia, coffee production for marketing year 2022/2023 (October–September) is anticipated to hit 8.25 million 60-kilogram bags, with record exports of 4.72 million bags, according to the USDA.
The price of coffee hit a high point in February, capping 17 months of increases, The I-CIP hit 210.89 U.S. cents per pound that month. One factor pushing prices up was a slump in supply from Brazil, the leading producer, due to poor weather conditions in 2021.
While production is anticipated to improve, the Brazilian coffee industry is facing other challenges. Reuters reports that coffee farmers in Brazil have been defaulting on contracts two years in a row. These defaults have caused a decline in forward sales, opening the door to spiking prices, according to the report.
In addition to increasing supply, global economic conditions and recession concerns could lead to lower demand in the coffee industry.
“While we anticipate an improvement in supply-side conditions, in sum we see global coffee production rising by 4.1% in 2022/23 to start to weigh on prices, while we see demand-side factors as the main cause of lower prices in the short term,” financial services company Fitch Solutions noted in an August 2022 report.
Through 2026, Fitch Solutions anticipates global production to outpace global demand. It forecasts global production to increase at a 2% compound annual growth rate (CAGR) and consumption to increase at a 1.7% CAGR.