The price of robusta coffee futures at the InterContinental Exchange (ICE) London, the key trading hub, fell by USD 9/MT (-0.5%) week-on-week (w-o-w) to USD 2,063/MT for the period ending 25th May 2022. The decline was in keeping with the recent trend, during which the robusta price has contracted from USD 2,130/MT on 23rd March 2022, representing a decline of USD 67/MT (-3.2%) over the nine-week period.
Global geopolitics has continued to impact robusta market dynamics and prices through the calendar year-to-date. The ICE London price began to slide in the weeks immediately preceding, and following, Russia’s military offensive in Ukraine, which commenced on 24th February 2022. Indeed, the robusta price fell by USD 226 /MT (-11.1%) between 16th Feb – 9th Mar, as the markets jittered from the potential ramifications. Russia is the world’s fifth largest coffee importer, primarily robusta, so the demand threat regarding economic sanctions from was one of several factors weighing on the terminal price. The price rebounded briefly, by USD 93/MT (+4.6%) over the two-weeks after 9th March 2022, due partly to supply concerns from Vietnam, the world’s top robusta grower and exporter.
However, demand-side dynamics appear to be the key factors fuelling the downward price trend that began in late-March 2022. Concerns of a prolonged global recession limiting coffee demand, particularly in Europe, the world’s largest coffee market, highlight a bearish backdrop. Reports that the geopolitical uncertainty led speculators to liquidate long positions in coffee, in favour of safer assets like metals and the USD, appears to further confirm the demand depletion. The ‘cost-of-living’ crisis, fuelled by surging global inflation, is also detrimental to coffee purchases, as consumers look to scale back spending, particularly for luxury goods, which coffee is to many lower-income families. This ‘demand destruction’ is compounded by the re-emergence of COVID-19 outbreaks and subsequent lockdowns in China, another key market, where economic growth is being severely stunted.