Coffee Consumption Expected to Jump

The world is drinking more coffee, with demand likely to rise almost 25% in the next five years, according to the International Coffee Organization.

“Consumption is increasing as societies in India, China and Latin America continue to be westernized,” said Roberio Silva, the executive director of the intergovernmental coffee body.

Coffee demand is expected to jump to 175.8 million bags of beans by 2020, from 141.6 million bags now, Mr. Silva told the Africa Fine Coffee Conference in Nairobi last week. Each bag weighs about 132 pounds.

The strong demand projection comes at a time of squeezed global coffee supplies, which pushed prices to multiyear highs last year following a historic drought in Brazil, the world’s largest grower.

The forecast rise in demand comes as a drought in producer Brazil has pushed prices to multiyear highs. ENLARGE
The forecast rise in demand comes as a drought in producer Brazil has pushed prices to multiyear highs. PHOTO: BLOOMBERG NEWS
Total global coffee production is projected to drop to around 141 million bags during the current crop year, from 146.7 million bags last year, largely because of the effects of drought in Brazil and a plant fungus that is curbing output in Central America, Mr. Silva said.

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“The world cannot afford to keep looking only at Brazil” for production, Mr. Silva said.

Weather worries this year have added uncertainty to Brazil’s harvest. Conab, the government crop agency, predicts coffee production at 44.1 million to 46.6 million bags of beans, on par with last year. The National Coffee Council, however, has said the harvest will be lower, at 40 million bags.

“Brazil is suffering from an additional drought, this time in its robusta-growing regions,” Mr. Silva said. Robusta is a variety of coffee that is more bitter and less expensive than arabica. Brazil grows both types of coffee.

Rainfall in the state of Espirito Santo, where much of the nation’s robusta is grown, is expected to remain low in the week ahead, according to Brazilian weather forecaster Somar Meteorologia. Marcos Antonio dos Santos, an agrometeorologist with Somar Meteorolgia, said more rains are expected in coffee-producing regions of São Paulo and Minas Gerais, where arabica is grown.

Coffee output from growers such as Vietnam, India and Indonesia won’t be enough to stabilize the markets next year, said Judith Ganes Chase, the head of U.S. commodity consultancy firm J. Ganes Consulting LLC. As a result, global coffee stocks may drop by four million bags in the year beginning Oct. 1, she said.

While tight coffee supplies ordinarily push prices higher, the market is also grappling with currency fluctuations.

“The plunging real has kept the market from advancing as one might expect from the ongoing problems in Brazil,” Ms. Chase said.

The Brazilian real has been trading at the lowest level in nearly a decade against the U.S. dollar. Brazilian producers and exporters tend to sell coffee when the real weakens because they get more reais back when they convert their dollar-denominated sales into their home currency.

On Friday, the May arabica coffee contract traded on the ICE Futures U.S. exchange eased 0.6% to $1.6650 a pound. Robusta futures traded in London rose 1.1% to $2,009 a metric ton, the equivalent of 91 cents a pound.

—Rogerio Jelmayer contributed to this article.

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