Ukraine War, Russian Economy Woes To Hurt Coffee Demand - Report
The war in Ukraine and the impact of sanctions to the Russian economy will hurt global coffee demand and lead to a supply surplus in the 2022/23 season, broker and consultancy HedgePoint has said in a report.
It estimates that Russia, one of the world's largest consumers of coffee, will use nearly one million bags less due to difficulties in the trade and high prices that will cut buying at Russian supermarkets and coffee shops.
HedgePoint projected that the displacement of millions of people in Ukraine will reduce coffee demand in that country by nearly 400,000 bags.
"There was a sharp increase of around 20% in coffee prices in Russia already," said HedgePoint coffee analyst Natalia Gandolphi, adding that stocks in the country are expected to remain at a regular level only until July.
As a result of decreased coffee demand in Ukraine and Russia, the consultancy cut its estimate for the global 2021/22 (October-September) supply balance to a deficit of 7.21 million bags from a deficit of 8.68 million bags seen in February.
The projection for the 2022/23 season, with no sign of a near-term end to the Russian invasion, changed from a deficit of 2.42 million bags to a surplus of 1.29 million bags.
The deficit in the current season (2021/22) remains large, despite war-related demand losses, since top grower Brazil is expected to have another below-average crop due to a historic drought in 2021.
"Corrections In The Market"
"The feeling of demand destruction has caused (price) corrections in the market, something that could continue going forward," Gandolphi said.