Coffee fundamentals are positive, but recession could cut prices - report

FILE PHOTO: Roasted coffee beans are seen on display at a Juan Valdez store in Bogota, Colombia June 5, 2019. REUTERS/Luisa Gonzalez

NEW YORK (Reuters) - The fundamentals of the coffee market remain positive amid the lowest availability of beans since 2008, yet prices could go down if the global economy enters a recession, according to a report released on Tuesday.

Broker and consultancy HedgePoint Global Markets said the stocks-to-use ratio indicating the level of supplies in the global coffee market will be down to around 40% in the 2022/23 season (Oct-Sept). That would be the lowest 2008/09.

Bad weather last season resulted in a deficit of 7.2 million bags in the market.

“But the macroeconomic outlook has been offsetting those positive fundamentals, and it is not the first time” that this has happened, analyst Natalia Gandolphi said in the report, adding that during the last four global recessions coffee prices fell 13% on average.

In the latest global recession, in 2008/09, coffee prices fell 12%, she said.

Arabica coffee futures on ICE U.S. fell to the lowest level in nine months on Friday as funds liquidated long positions fearing higher interest rates and a potential recession. Prices partly recovered on Monday in volatile trading.[SOF/L]

The consultancy cut its estimates for coffee production in Colombia (13.2 million bags), Honduras (6.3 million bags) and Vietnam (31.7 million bags) this month due to weather issues and high fertilizer costs.

It sees the global supply balance at a small surplus of 0.3 million bags in 2022/23 (Oct-Sept).

Reporting by Marcelo Teixeira; Editing by David Gregorio