Coffee Glut Means Lower Prices

Commodity cost down 54% over past three years

Coffee Glut Means Lower Prices, Bigger Margins for Coffee Retailers

NEW YORK -- A growing glut on the coffee market has been good news for coffee retailers recently.

This week, coffee futures fell, capping the longest run of annual declines since 1993, on concern that a global glut will increase as crop conditions improve in Brazil, the world’s biggest producer and exporter of Arabica beans, according to a Businessweek report.

Widespread rain in the next several days in Brazil’s Sao Paulo and Parana states will aid plants by increasing soil moisture. The nation’s crop will reach 49.2 million bags, higher than a previous estimate of 47.5 million, Conab, the government’s forecasting agency, said on Dec. 20.

Global production is set to exceed demand for the fourth straight season, pushing inventories to a five-year high, according to the U.S. Department of Agriculture. The glut is helping to cut costs for Starbucks Corp. and Green Mountain Coffee Roasters Inc., Businessweek reported.

“There’s just too much coffee around,” Michael K. Smith, the president of T&K Futures & Options Inc. in Port St. Lucie, Florida, told the news agency. “A better crop outlook in Brazil is certainly pushing prices lower.”

Arabica coffee for March delivery fell 3.5% to settle at $1.107 a pound on ICE Futures U.S. in New York, the biggest drop for a most-active contract since Nov. 22. In 2013, the price tumbled 23%, the third straight annual decline. The commodity plunged 54% since the end of 2010.