Well readers, it’s that time of year again. No, it’s not holiday shopping and excessive eating that I speak of. I mean that OTHER time of year, when the C Market begins to rise, and everywhere roasters collectively cringe, day traders jump in the mix, the Cubs win the Series, and dogs and cats live together in harmony. In other words, mass hysteria! Okay, let’s take step back. While it’s easy for everyone to jump ahead with wild predictions of where this will end, our team here at Vournas Coffee Trading would like to present a sensible, broad look at the C Market with the reminder that predictions rarely reflect the outcomes.
Let’s start by taking a look back at January of this year when the market was hovering around the 1.15 – 1.20 range. These prices were largely the result of consecutive past seasons of overproduction; what I mean is the number of bags grown versus volume roasted. Between 2013 and 2014 alone we had an overproduction of around 24 million bags. Those numbers left the industry with an emergency stock to fall back on, but that only lasts so long.
Flash forward and all of a sudden robusta exports from Southeast Asia and Indonesia are now down 8%, and robusta prices have risen 5% in September alone! Brazilian output is also down and could continue a downward trend in the coming year due to the nation’s abnormal weather. Unfortunately for Indonesia we expect more of the same. Now couple that with our second straight year of U.S. consumption exceeding green production abroad and here we are in a 1.65 C Market.
Why are the robusta numbers significant? Even if you don’t roast robusta (or Indonesian\Vietnamese coffee), it’s important to note that when there’s not enough robusta to roast, these roasters still need coffee! The roasters who used to buy robusta, will now be forced to buy low-grade or old-stock arabica, and the roasters who are accustomed to buying low-grade arabica, will likewise be forced to purchase the more pricey mid-grade washed arabicas. See where we’re going with this? It leads to a sort of upwards snowball effect, which brings us back to our current 1.65 state of affairs. Coffeegeddon? Hardly. History usually repeats itself and we’ve been here before. What we do know is that considerable attention will be given to production stats as they become available. The low yields in Indonesia are all but baked in at this point, and with Brazil’s numbers having the largest impact, everyone will be looking to them to set the tone.
So what happens next? Where will the market be in 2017? It’s anyone’s guess. Looking ahead our team is here to keep you informed of the changes with a focus not simply on price but availability. Hey, we can’t control the C Market, but we can ensure that our coffees continue to come in, and our roasters’ operations continue uninterrupted.
At the end of the day, you can reference growth charts, look at the technicals or pore over the fundamentals; hell we’ve even got real-time pricing on our phones! Truth be told, at this moment we have more real-time information available than ever before. Going forward this will no doubt help stabilize the market, to the benefit of farmers, traders, roasters and, well everyone! But until then, we advise you to heed the bumps in the road. These things are just as impossible to predict as the outcome of an election. If we had to guess, it would seem the market is going to go up before it goes down. In the meantime we can assure you, our stock of amazing coffees isn’t going anywhere!
– Andrew Vournas