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Coffee futures - will they prove star performers in 2015 too?

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Coffee futures were standout performers among commodities last year, arabica contracts in particular, lifted by the dent to Brazilian production from persistent drought.

Arabica prices soared 51%, despite better-than-expected output in Colombia, the second-ranked growing country for the variety.

The rise in robusta coffee prices was more modest, at 12.9%, with Brazil actually managing a bumper harvest of the variety, thanks to irrigation and better weather in the main producing state of Espirito Santo, east of the main arabica growing state of Minas Gerais.

Will arabica's rally last? Will robusta continue to underperform in 2015, or will more demand come its way thanks to elevated arabica prices?

Commerzbank

"The International Coffee Organization puts the 2014-15 deficit on the global coffee market at 800,000 bags and is thus still on the optimistic side. Coffee trader Volcafe has recently even raised its deficit forecast from 9m to 10m bags.

Commerzbank arabica coffee price forecasts, 2015

Q1: 210 cents a pound

Q2: 220 cents a pound

Q3: 220 cents a pound

Q4: 230 cents a pound

Prices: quarter average, front New York futures contract

"We will have to wait to see more clearly whether fruit development will also be satisfactory. However, most watchers do not expect that production can be lifted well above 2014-15 levels.

"If it becomes necessary to dip into stocks of arabica coffee as early as 2014-15 and this continues increasingly in 2015-16, prices should get a lift.

"Nonetheless, we expect a rather moderate upward movement because the previous years permitted the build-up of a sufficiently large cushion of coffee stocks that should prevent a genuine shortage of supply on the coffee market."

Roberto Santinato, Fundação Pró Café

"About 50% of the Brazilian producers who sold coffee ahead [in 2014] sold at about R$300 a bag or below.

"This is R$150-200 below [December prices], and this shortfall is not be going into producers' pockets.

"I believe that next year's harvest will not exceed 38m-41m bags.

"That would be insufficient to depress the price again to R$300 a bag, and necessitate values between R$ 450-500 [$167-185] a bag, maybe a little more. Already specialty coffees can reach R$600."

Macquarie

"Coffee yields in many regions of Brazil have proved to be better than expected. Production estimates for Brazilian coffee output were nonetheless lower than last year.

"In Columbia, production estimates were also up as trees planted back in 2009 showed better yields, having better resistance to the coffee rust fungus.

"Despite upgraded expectations for coffee output announced by numerous organisations, we are still likely to end the year in a deficit.

"Strong exports from Brazil and Vietnam seen recently, cannot be maintained indefinitely and supply shortages in the future are likely to drive prices higher."

Rabobank

"A second year of deficit production projected for arabica coffee, and a balanced robusta market, will support coffee prices in 2015.

Rabobank arabica coffee price forecasts, 2015

Q1: 195 cents a pound

Q2: 200 cents a pound

Q3: 185 cents a pound

Q4: 175 cents a pound

Prices: quarter average, front New York futures contract

"A deficit in the world coffee market by itself would send a sufficient signal for higher prices. The fact that it would be second consecutive deficit and that stocks have already been drawn down in 2014 makes the circumstances even more bullish.

"Coffee prices are expected to remain elevated and volatile through 2015… Given normal circumstances, a recovery in {Brazilian] production would be expected in 2016, which puts pressure on prices in late 2015."

Robusta

Commerzbank

"Robusta coffee has followed the price rise in arabica coffee – though in a much more moderate form.

Commerzbank robusta coffee price forecasts, 2015

Q1: $2,150 a tonne

Q2: $2,200 a tonne

Q3: $2,250 a tonne

Q4: $2,300 a tonne

Prices: quarter average, front New York futures contract

"Watchers believe that the harvest could prove only slightly lower as last year's record, when 1.7m tonnes (28.5m bags) were harvested.

"But not even another good harvest in Vietnam and the already concluded, quite positive 2014 Robusta harvest in Brazil – which even closed with an increase on 2013 – prevent Volcafe, for example, expecting a market deficit for 2014-15 also in robusta."

Rabobank

"Robusta production should see a modest 2.6% growth in 2014-15 in comparison with the previous year.

"In Brazil robusta areas were hardly affected by the drought in 2014 and should produce similar levels in 2015, or even see a small increase.

"Higher [arabica] prices and concerns about Brazil's crop should result in a shift from arabica to robusta in average roasters' blend.

"For this reason, robusta consumption is forecast to grow more at 3.6% in 2014-15."

By Agrimoney.com

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