Brazilian Arabica is in a massive oversupply in ICE Futures exchange warehouses. The situation could weigh negatively on prices and permanently force some small farmers out of the market.
The world’s largest producer has long been able to supply large volumes of affordable coffee for the mass market as mechanised harvesting and cheaper processing methods keep its production costs below its rivals.
But, as previously reported, Brazil’s unusually productive harvest means highest-ever coffee exports this year so far.
Brazil is boosting coffee production quantities and producing higher quality Arabica and now it is sending their excess beans to the New York futures market in significant volumes.
Data shows Brazilian coffee held in ICE warehouses and available for delivery against futures contracts has soared to 88,294 bags from 650 bags on Sept. 3.
This poses a threat to rivals, mostly in South and Central America, as it could weigh further on benchmark prices at the ICE Arabica futures, which fell to almost 14 year lows in 2019 and remain below many small growers’ production costs.
ICE futures generally fall when the volume of stocks rises as it becomes more readily available and more production of the Brazilian crop is expected in the future. The economics of supply and demand in action.