By Muhoozi Nelson Mandela
Coffee futures prices surged on Monday, driven by concerns over dwindling supplies from two of the world’s largest coffee producers, Vietnam and Brazil.
The London International Financial Futures and Options Exchange (LIFFE) saw substantial gains in Robusta coffee contracts. The September position closed at UGX 18,158,192 per tonne, up by sh449,152, while the November position also gained sh449,152, closing at sh17,348,512 per tonne.
The rally was primarily supported by a reduction in coffee exports from Vietnam, the world’s leading producer of Robusta beans.
Vietnam’s General Department of Customs reported that the country’s coffee exports in August fell by 14.1% year-on-year, amounting to 1.22 million bags.
Coffee market analysts cited this drop in Vietnam’s exports as a key factor supporting Robusta prices. Vietnam accounts for a significant portion of the global Robusta supply, which is predominantly used in instant coffee and espresso blends.
Similarly, the Intercontinental Exchange (ICE) saw Arabica coffee futures close higher on Monday. The September Arabica contract rose by 9.40 cents to close at 245.40 cents per pound (sh9,103 per kilogram), while the December contract increased by 8.90 cents, ending at 243.45 cents per pound (sh9,031 per kilogram).
Reports from the exchange indicate that the rise in Arabica prices was driven by dry weather in Brazil, the largest producer of Arabica coffee.
According to Brazil’s meteorological agency, Somar Meteorologia, the country’s key coffee-growing regions experienced no rainfall over the past week.
Local impact and perspectives
Robert Byaruhanga, President of the Uganda Coffee Federation (UCF), commented on how global shipping issues have contributed to the rise in coffee prices.
He pointed out that shipping route changes, due to concerns over attacks in the Red Sea amid ongoing conflict in the Middle East, have added to the challenges.
Additionally, Byaruhanga highlighted that European buyers are grappling with uncertainties about complying with the European Union Deforestation Regulation (EUDR). The regulation aims to ensure that products imported into the EU have not contributed to deforestation or forest degradation.
“One way for companies to respond is to secure enough supply before the regulation is implemented at the end of this year. This has led to a big incentive to accumulate stocks now, driving prices upward,” Byaruhanga explained.
He also stressed that climate change is another significant factor affecting global coffee prices: “Unpredictable weather increases the cost of production in the long run. It represents a systemic risk to the coffee sector, which will become more pronounced over the next decade.”
Byaruhanga warned that extreme weather events could exacerbate inter-seasonal variations in global coffee production, which would likely increase price volatility.
“The frost concerns in recent weeks show what a wild ride the market is expected to take,” he added.
Outlook for coffee prices
Byaruhanga projected that coffee prices would remain volatile throughout 2024, with a potential decrease in 2025 due to anticipated strong harvests in Brazil.
“Uganda achieved an impressive $1.14 billion (sh4.23 trillion) in coffee exports between May 2023 and June 2024, marking a record high for any 12-month period in the country’s history,” he noted.
Looking ahead, he predicted that some of the current market distortions should eventually correct themselves. Additionally, the United States Department of Agriculture (USDA) has projected a production surplus for the current coffee marketing year, which could help stabilize prices.
Market analysts also pointed to technical factors such as increased speculative activity due to tightening supplies. Furthermore, they said the market has experienced shallow backwardation, encouraging more coffee to be brought to the trading board.
September 10, 2024, coffee market prices in $ cents per Lb (pound)
| Coffee type | Price sh/kilo)Exchange rate(1 $ =3,712/=) |
| Screen 18 | 238.19 |
| Robusta – Screen 15 | 233.19 |
| Robusta – Screen 12 | 230.19 |
| Arabica – Bugisu AA | 240.40 |
| Arabica – Bugisu A | 239.40 |
| Arabica – Bugisu PB | 239.40 |
| Arabica – Bugisu B | 237.40 |
| Arabica – Wugar | 238.40 |
| Arabica – Drugar | 219.40 |
Week’s Coffee farm gate price range in sh/kilo
| Category of coffee | FAQ (Fair Average Quality) | Kiboko | Arabica Parchment | Drugar Coffee(Clean) |
| Price Range | 12,000-13,000 | 6,000-6,500 | 12,5000-13,000 | 12,000-12,500 |
