ICO forecasts coffee output rising 5.8% in 2023-24 on higher South American, African production

World coffee production will likely rise by 5.8 per cent to 178 million bags (of 60-kg each) in the coffee year 2023-24 from 168.2 million bags, on rising output in South America and Africa, the International Coffee Organisation (ICO) said.

In its outlook for 2023-24, ICO also said the world coffee consumption would rise by 2.2 per cent to 177 million bags from 173.1 million bags in 2022-23, on rising demand from the non-producing countries.

Arabicas’ share of total world output during 2023-24 is expected to be 57.4 per cent at 102.2 million bags, up from previous year’s 94 million bags. Robusta production during the year is forecast at 75.8 million bags up from last year’s 74.2 million bags.

South American production is set to increase by 9.8 per cent, rising to 89.3 million bags; while the output in Africa is seen rising to 20.1 million bags from 17.9 million bags, the ICO said. Asia and Oceania production is seen marginally up at 49.9 million bags, while Central America is seen registering a decline to 18.7 million bags.

Weather events

ICO said the outlook is framed by a set of broad assumptions such as the adverse weather conditions, first noted in coffee year 2022-23 and continuing into coffee year 2023-24, will have a negative impact. Also, the anticipated El Nino weather event is set to dampen the outlook in Asia, especially in Indonesia, whereas Vietnam is expected to benefit from the hotter weather as irrigation mitigates the reduced precipitation.

The biennial production effect will play a large role in the outlook, especially for Brazil and the Arabicas, as the impact of the July 2021 frost continues to be resolved. Coffee year 2023-24 is anticipated to be an exceptional off-biennial year, feeling more like a good on-biennial following an average on-biennial year.

Also, the area under coffee is continuing to expand within existing agricultural land, the impact of which will be especially pronounced in the outlook for Ethiopia, it said.

On the consumption front, the outlook is broadly framed by the assumption that the global economy will continue to grow at above three per cent, and that the industry will respond to the large drawdown of stocks, which will be 2.2 per cent to 177.0 million bags, with non-producing countries making the biggest contribution to the overall increase.

Coffee consumption in this group of countries should expand by 2.1 per cent. As a result, the world coffee market is expected to run a surplus of 1.0 million bags in coffee year 2023-24, the ICO said.

Stocks drawdown

During 2022-23, the consumption did not faithfully follow the established pattern due to the impact of the high cost of living, falling disposable incomes and a long stocks drawdown. Despite coffee being relatively inelastic, the challenging global economic environment would have had a negative impact on its consumption. World coffee consumption decreased 2 per cent to 173.1 million bags in 2022-23.

The world inflation rate was at its highest in 2021 at 9.4 per cent, while the average benchmark interest rate averaged 4.9 per cent at the end of September 2023 in the European Union, UK and USA, the highest level since an average of 5.8 per cent in 2000. At the same time, there was a large drawdown of stocks with combined stocks reported by the European Coffee Federation and those held at the Intercontinental Exchange’s warehouses in the US fell by 4.8 million bags from 14.5 million to 9.8 million. This drawdown would have reduced the need for purchases on the international market, seemingly reflected as lower and anomalous global consumption rates for coffee year 2022-23, it said.

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