A tale of 2 beans

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Coffee beans come in 2 species: Arabica and Robusta.

When one bean price goes down, the other goes up.

For instance, in 2016, buyers feared that output of Robusta was down because Vietnam had suffered a harvest failure. Consequently, Arabica shot up. However, the market soon corrected upon learning that the Robusta demand would be met.

So coffee is a volatile market.

Arabica

Arabica is more popular in the US.

Brazil, the biggest exporter, has seen output drop recently. However, this hasn’t reversed a price drop because the market is well supplied from previous high yield harvests. And Indonesia may increase output to compensate.

Analysts blamed poor weather and a beetle infestation destroying stock. Brazilian farmers have also been stockpiling, waiting for a higher price. And it could be soon: harvest output is predicted to continue to fall, which may raise prices.

Also, the strength of the Brazilian real against the US dollar has made Brazilian exports more expensive for their American customers. This is more significant for Arabica: it is priced in US dollars even though it’s produced in Brazil, meaning it is very sensitive to the value of the dollar.

Robusta

Robusta is Europe’s bean of choice, with Vietnam as the biggest producer.

Since January, Robusta prices have rocketed due to globally poor crop conditions.

More recently, prices are slightly up because of poor weather and pest outbreaks in India. Customers are beginning to turn to Arabica, so a market correction is not too far off.

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