Coffee Outlook Q3 2019: Volatile Differentials Ahead
Both arabica prices and the Brazilian real remain virtually unchanged in the last 90 days, despite the volatility during the period, according to the Rabobank Coffee Outlook Q3 2019.
Coffee prices saw quite a bit of upside volatility in the quarter, but finished more or less unchanged. The frost seen in Brazil in July was the main reason for the upside, but it only decreased the potential for next year’s arabica crop by 1% to 3%. Probably the biggest event in the quarter was the materialization of the low quality of the Brazil arabica harvest finishing now. Back in March, we warned that the quality could be lower than normal, given the number of defects in the cherries we found in our crop survey, and this was later compounded by the rainy weather at the start of the harvest. The quality issues in the largest arabica producer will result in higher demand for certified arabicas at the exchange warehouses, along with large movements in differentials for specialty coffee.