Arabica Prices Explained
Arabica prices are down by 1.52% as its inventory recovered slightly to a 6-week high of 256,380 bags. Additionally, Brazil’s Trade Ministry reported that its coffee exports ( not roasted ) jumped by 33.7% ( 244 million metric tons ). Furthermore, Indian bean exports join the inventory rally as their output is up by 10%.
Why are Arabica prices fluctuating?
Arabica price has been the subject of value variation in the market for years and here are the top contributing factors:
1. Weather Conditions
Brazil leads the top Arabica producers in the world but the recent devastating hot weather in the country impacts its coffee production as water scarcity troubled bean growers. Thus, this creates a market gap between suppliers and consumers, ultimately affecting Arabica prices.
2. Coffee Quality
Arabica plants growing temperature ranges from 15 to 24 degrees Celsius. If the temperature drops or rises from this required bracket, it will affect the plants’ crop yields and coffee quality. Thus, low-quality Arabica bean means cheaper prices and premium quality goes for higher prices.
3. Production Cost
Arabica bean’s quality relies heavily on rose and citrus fertilizers, soil management, and adept harvesting.
These all require resources and effort to maintain and achieve. Therefore, coffee growers demand good value exchange to compensate for their work and livelihood. Generally, the rising production cost is also a price driver of Arabica coffee.
4. Currency Fluctuations
Like any other commodity, Arabica’s price in the international market is in U.S. dollars. Therefore, a strong dollar rate means an increase in Arabica prices. Similarly, a weak dollar rate will result in a decrease in Arabica prices.
Which variables impact the price of Arabica?
- Weather Conditions
- Coffee Quality
- Production Cost
- Currency Fluctuations
- Cultivation Practices
- Global Economic Conditions
Where does Arabica come from?
Arabica coffee famously originated in the Southwestern highland regions of Kafka and Buno of Ethiopia.
Its cultivation spread to Sudan, Yemen, and Arabia, Ethiopia’s neighboring countries. Arabica coffee found its way to Europe in the 16th century through trade and it quickly expanded to America and other countries in the world.
Generally, the Arabica season falls on the country’s rainy season where it grows however, its season also depends on the geographic location and climate.
In Brazil, the largest Arabica producer, the Arabica season starts from May to September. This is the dry season when cherries ripen and are ready to be harvested.
In Ethiopia, the Arabica season runs from October to February. Just like Vietnam, Ethiopians harvest their ripe cherries through hand-picking which is time-consuming but produces high-quality Arabica coffee beans.
The best processing method for Arabica coffee beans depends on the desired flavor profile.
However, wet processing is generally considered to produce the highest quality as it provides a clean, citrusy, and flowery coffee flavor.
Arabica’s sweet and nutty flavor makes it a perfect ingredient for coffee recipes such as Lattes, Cappuccinos, Mochas, Macchiatos, and Iced Coffee.
Primarily, this caffeine delight comes from Brazil which has an average yearly production of 30 million Arabica coffee bags. Ethiopia, Guatemala, Honduras, India, and Vietnam follow distantly.
What is the future price of Arabica?
Presently, Arabica coffee prices show headwinds in the market due to healthy inventory. However, the commodity’s farming requirement is a huge factor in its future production output as warmer temperatures constantly trouble bean growers.
For instance, the effects of El Niño aren’t over in Asia, and the dry weather in Brazil reduced the country’s crop yields. Thus, global demand might offset its inventory in the coming years. Additionally, supply issues triggered by geopolitical tensions in the Red Sea will highly affect its prices in the market.
Overall, Arabica coffee is the most popular in the world, accounting for about 60% of global coffee production due to its smooth, mild flavor, and complex aroma. Market analysts predicted a bullish Arabica price in 2030 at $4.50 per pound.