Coffee prices dropped to their lowest level in more than a year on Thursday. Arabica coffee futures sank more than 5 percent in heavy volume on Thursday, marking their biggest tumble in 2-1/2 months after an influential trade house cut its forecast for the world production deficit this season, and switched to forecasting a surplus for 2015-16.
July arabica coffee futures settled down 7.55 cents, or 5.6 percent, at $1.2845 per lb, their biggest one-day drop since March 3. July robusta coffee closed down $43, or 2.5 percent, at $1,682 a tonne.
Volcafe, the Swiss-based coffee division of commodities house ED&F Man cut by 2.5m bags to 6.4m bags its forecast for the world coffee output shortfall in 2014-15.
And it forecast a harvest surplus next season, of 1.3m bags, compared with a previous expectation of a 1.4m-bag shortfall.
World coffee output for 2014/15 is seen at 143.8 million bags, 1.6 million bags more than in a previous report from the same coffee house. Despite this upward revision the figure is still 12.2 million bags down from last year’s record crop.
For 2015/16, Volcafe expects a 7% increase year-on-year to 154.5 million bags.
On the other hand, world demand was downgraded by a combined 1.9m bags over the two seasons – with an upgrade to the estimate of arabica consumption more than offset by lower robusta forecast.
The revisions were, to some extent, predicted after Volcafe earlier this month raised its forecast for output in Brazil, the top producing country, both this year and in 2014.
Volcafe expects a record harvest in Vietnam, although the production forecast for 2015-16 was lowered by 100,000 bags to 30.5m bags.
Colombia’s output is forecast at 12.5 million bags in 2014/15 and 13 million bags in 2015/16.
Indonesia’s 15/16 crop production is forecast at 11.2 mio bags (9.8 million of robusta and 1.4 million of arabica).