Coffee futures soared for much of 2016, boosted by supply worries in particular in the robusta market, which fed through into a rare clamour even for low quality arabica beans too.
But arabica futures dropped back late in the year, limiting gains for 2016 to 8.2%, as a decent Brazilian flowering period boosted hopes that output of this variety at least in 2017 will prove strong for what is an "off" year in the country's cycle of higher and lower production years.
Robusta futures fared better, ending the year 45% up.
But will they now follow Arabica into retreat? Or will arabica futures find renewed vigour?
Leading commentators give their views.
Lower production in Brazil may maintain firm prices in 2017.
Domestic buyers consulted are already worried about the likely fair supply of the grain in 2017 and also in early 2018. This scenario should keep coffee prices steady.
Even without official estimates of Brazilian production for 2017-18, initial signs already indicate that it should be lower. It being a negative year [in Brazil's cycle of alternate higher and lower producing years], added to the pruning/cuttings carried out in the main growing regions, should reduce output.
As for robusta, the return of rains, especially in Espírito Santo, has encouraged producers. However, production should not reach levels. This is because many crops will not be able to recover, while others have even been uprooted.
Regarding prices, after a year of fluctuation in arabica values, observers consulted by Cepea are more optimistic for 2017, based on the expectation that the 2017-18 harvest is 20-30% lower year on year.
For lower quality coffees, values can also be maintained at firm to high levels as, since robusta production should not recover, roasters should continue to look for the lower grade arabica for their blends.
It doesn't look as if the coffee shortage will come to an early end. Even in 2014-15 and 2015-16, there were global deficits of 2.7m and 3.3m bags respectively, which eroded the stocks previously built up. Now 2016-17 will be a third season ending in a deficit.
The continuing shortage is mainly a result of poor robusta crops in 2016-17. This is due to poor harvests in the main coffee-growing countries. And in Brazil, since blooming is still suffering from excessively dry weather in the main cultivation state, Espirito Santo, the outlook for the next robusta harvest is once more gloomy.
Commerzbank forecasts for arabica (and robusta) coffee futures
Q1 2017: 155 cents a pound, ($2,050 a tonne)
Q2 2017: 150 cents a pound, ($2,000 a tonne)
Q3 2017: 145 cents a pound, ($1,900 a tonne)
Q4 2017: 145 cents a pound, ($1,800 a tonne)
Forecasts on quarter-average basis
Overall, we think it likely that the coffee market will be balanced at best next season too. With stock levels having fallen, the shortage can be expected to continue. If Brazil were to experience a severe cyclical downturn in output after all, the balance could soon develop into another deficit.
Under these circumstances, we expect the price of coffee to remain high. The market could however be subject to intermittent volatility from exchange-rate fluctuations. If the Brazilian real continues to depreciate over the course of the year as expected – either for internal reasons or in response to US interest rate hikes – prices will no doubt be checked accordingly.
The expectation of a better robusta crop in Vietnam 2017-18 should have the same effect.
Coffee prices continued the escalation that began at the outset of the year and broke the 160 cents-per-pound ceiling.
Consensus forecasts, arabica coffee price, according to FocusEconomics
Q1: 159 cents a pound
Q2: 161 cents a pound
Q3: 159 cents a pound
Q4: 165 cents a pound
Forecasts for spot contract, quarter-average price
The upward trend in prices, which stems from lacklustre supply in top producer countries and increased global consumption particularly from China, India and the US, will likely persist throughout the forecasted period.
An impressive bull run in both arabica and robusta contracts saw coffee become one of the Bloomberg commodity index's top performers. We cited changing demand trends as one of the reasons for this with millennials consuming a larger variety of coffee and drinking more cups.
The demand side of the equation continued to look strong whilst the supply side continued to be disrupted by supply side shocks leading the market into a long term upward trend.
The New York market has sold off sharply. We suspect that a combination of long liquidations along with algorithmic traders may have exaggerated moves.
If we see some stability around 140 cents a pound we could see futures push back towards 150-160 cents a pound.
The fundamental outlook remains unchanged since November as strong demand which supported the market throughout 2016 is set to continue into the coming year.
From a supply side, we suspect a rise in production will loosen the tension on the market and as we move through 2017 see prices soften towards the second half of the year.
After three consecutive [global consecutive] deficits in 2014-15, 2015-16 and 2016-17, we calculate a very preliminary fourth consecutive deficit of 2m bags in 2017-18.
Rabobank forecasts for arabica (and robusta) coffee futures
Q1 2017: 157 cents a pound, ($2,070 a tonne)
Q2 2017: 153 cents a pound, ($2,060 a tonne)
Q3 2017: 152 cents a pound, ($2,040 a tonne)
Q4 2017: 149 cents a pound, ($2,040 a tonne)
Forecasts on quarter-average basis
We expect a strong production increase in washed [arabica] coffee in 2016-17. Considering a strong recovery in Peru, to 4.7m bags, in 2016-17 and small production increases in Colombia, Honduras, Mexico and Nicaragua, we expect non-Brazil arabica to increase by 1.7m bags year on year.
On the robusta front, prospects for a recovery in Brazil's production in 2017 are slim, and we discard a full recovery in Espirito Santo.
Under these assumptions we see… a large reduction in the share of robusta in non-producing contries, which we expect to decrease from 35.6% in 2015-16 to 35.1% in 2016-17 and to 34% in 2017-18.
For the chance in robusta share in non-producing countries to actually decreased in this way, we will need to see a narrowing arbitrage [between arabica and robusta prices], which is what we expect, given a sharp global deficit in robustas, but good availability of milds.
By Mike Verdin