According to data from industry sources, global output for robusta will fall by up to 12% year on year in the 2016/17 season, largely on account of lower harvests in Vietnam and Brazil, the top two robusta producers. Globally, the coffee industry will suffer a production deficit in the current season, its 3rd in as many years.
Brazil is badly affected
The drop in robusta output has been particularly severe in Brazil due to drought conditions which dented yields in the top robusta producing state of Espirito Santo.
In contrast to Brazil, some of the larger robusta producers in the West African region, including Cote d’Ivoire and Cameroon, are recording moderate increases in coffee output in 2016/17.
Africa’s market share
In our view, African coffee producers should look to aggressively capture market share in an industry which is seeing resilient demand even from mature markets like the US.
Part of this growth in demand is fuelled by rising gourmet coffee consumption, underpinned by demand from ‘millennials’ or young adults. But other coffee industry segments are gaining pace too. A recent report by Research and Markets, foreasts that the global instant coffee sector will grow by a compound annual growth rate of 5.82% between 2016 and 2020 due to its convenience and appeal among new coffee drinkers. JDE, Nestlé & Starbucks are seen as key vendors in the market for instant coffee.
Brazil vs Cote d’Ivoire
The instant coffee sector’s reach has been clearly visible in Brazil where the government has now buckled under pressure from local instant coffee processors and agreed to their request to import robusta beans for the first time in decades. While Paraguay and Peru are the only two countries currently licensed to sell coffee to Brazil, Cote d’Ivoire could include coffee in ongoing negotiations with Brazil to lift the ban on Ivorian cocoa bean imports (into Brazil).