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Coffee outlook Q3 2024: Grounded and toasted

18 September 2024 15:18 RaboResearch

For most of the remainder of 2024, the coffee outlook remains neutral, but low stocks and weather risk almost guarantee high volatility.

Rabobank

    Our balance sheet is showing a neutral balance for 2023/24 with a deficit in robustas and a surplus in arabicas. We expect a very modest all-arabica surplus in 2024/25. However, any supply-demand balance is dwarfed by the extra demand for coffee due to longer shipping times, container scarcity, port congestion, and higher appetite for stocks ahead of the implementation of the European Union Deforestation Regulation (EUDR). At the same time, Brazilian arabica trees are begging for some rain amid a prolonged dry period and a heatwave, impacting the potential for 2025/26.
    EU Q2 imports increased by a massive 12.6% YOY and 11.4% versus Q1. Q3 and Q4 will also likely remain high as the looming EUDR implementation is causing frontloading in many origins. With a market in backwardation, building stocks will come at a cost, but one that some European companies are reluctantly bearing in the light of the uncertainty surrounding the EUDR.
    We maintain a neutral outlook for most of the remainder of 2024 due to the EUDR, port congestion, scarcity of containers, and the Red Sea crisis – all factors that are difficult to quantify. However, low stocks and weather risk almost guarantee high volatility. The EUDR implementation could have a bearish impact from late 2024 and early 2025.

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