Coffee Outlook Q4 2019: Demand Is Stealing the Show

Coffee prices have been on a rollercoaster this quarter, going from 97 USc/lb three months ago to USc 119/lb currently (second month). The move has been driven by the combination of a scramble for washed stocks and a positive global demand shock, at a time of lower washed production, according to the Rabobank Coffee Outlook Q4 2019.

Coffee demand has been extraordinary. Q3 2019 net imports in non-producing countries (adjusted by visible stocks) increased by 5.5% YOY. We believe the underlying demand is growing at only 2.7% in 2019, and the difference is explained by stocking in places we cannot see, like factory stocks and, consumer shelves (especially as multi-buy offers have been frequent).

Meanwhile, the structure of the market is changing, with the iconic top three US roast and ground coffee brands losing market share. Within the coffee world, consumers are finding a massive wave of innovation led by specialty coffee shops featuring single- origin coffees, new at-home single-serve machines, or even cold brew in a can. Our view is that the roast and ground consumers who are the most novelty-seeking are shifting elsewhere. This makes a tough bet for someone entering the roast and ground market hoping to engineer a turnaround.

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