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A Year in Coffee: 2023 Review

What a year 2023 was! Economists predicted we would see a recession in the US and the world over, sparked by higher interest rates and high levels of public and private debt. What surprised everyone, is that rates went even higher, and by the end of the year many major stock indexes were enjoying significant bull runs. Having fallen by 19% in 2022, the S&P 500 index managed to claw back nearly all of its losses, returning to within touching distance of its all-time peak! The questions around debt remain unanswered but the market enters 2024 buoyant and expecting rate reductions in the second half of the year.

Arabica Coffee opened 2023 at 164.65 c/lb and closed the year out at 188.30 c/lb, representing a 14.4% increase. While this is indeed a punchy increase, it pales in comparison to Robusta, which saw a 74.2% increase over the course of 2023! Roasters developed more of a liking for Robusta over the pandemic and this has been supportive of pricing, which has been strengthened by some low harvest numbers across key producers.

Currency news was dominated by Central Bankers’ choices around when and how much to raise interest rates. At the end of the year, we were very familiar with all of the acronyms around these joyful meetings such as FED, BOE, FMOC and J-Pow. Both the Euro and Pound ended the year stronger than they started and the rate pausing or cutting that occurs in 2024 will certainly have a large impact on their strength going forward.

Below are some key moments in 2023 that we thought were worth highlighting.


The CFTC’s COT report with the cut-off Tuesday the 17th of January showed the net short position of the non-commercials increased to total 43,940 lots, the shortest position we have seen since pre the pandemic. A sign the bears were coming to town? On the 11th of the month we did see the market hit its second lowest figure for the year at 145.30 c/lb. However, this sentiment was short lived and we quickly rebounded to finish the month at 177.40 c/lb.


Due to cyber related issues the COT was not published for most of the month, so we were in the dark about who was trading what. Inflation figures were the centre of attention with many politicians happy about figures getting closer to single digit numbers. The coffee market hit a high of 187.55 c/lb on the 22nd of February.


The collapse of Silicon Valley Bank (SVB), Silvergate and Signature sent jitters across the global financial system. The increased systemic risk was not US centric though, with illiquidity fears spreading across the pond to big European lenders such as Credit Suisse too.

Customers outside the Silicon Valley Bank headquarters (Jim Wilson/The New York Times)


Around Easter time the coffee market went gangbusters and from an open of 167.65 c/lb on April 1st, we saw a month high of 197.90 c/lb on the 18th and a close of 180.45 c/lb on the 28th. The key driver? The Brazilian Real’s movements and low crop figures from key origins.


Certified Arabica stocks fell to their lowest level in 6 months. Towards the end of the month they dipped to 598,000 bags, representing a 12% reduction over May and a 27% reduction over 2023 and this gave the market support as we entered June.


We saw some more rate pauses from central bankers and this caused some people to ask the question: “Have we seen the end of rate rises? ’’ The FED held the Fed Funds Rate at 5-5.25% but did indicate it was just a pause. Lagarde on the other hand said that there was still much work to be done: “Are we done? Have we finished the journey? No. We’re not at our destination. Do we still have ground to cover? Yes…’’


Early July was the strongest period of the year for the Pound Sterling (1.30) and the Euro (1.12), but we would see a steady decline from then to mid-October. Colombian coffee differentials continued to dip and other origins were thinking how long they had till they needed to adjust theirs or sell all their remaining stock! Most Central American producers managed to avoid this but Peruvians were keenly aware that they could not be dearer than Colombia for too long.


With the Bazil harvest over 75% complete towards the end of the month, we began to see some more solid estimates for the year’s volume start to come in. Cooxupe, Brazil’s largest coffee cooperative, was expecting almost 6.5 million bags, an increase of just under 30% on the previous year.


Weather in Brazil once again dominated the headlines and we moved from talking about the current harvest, to rain and flower development for the 2024/5 harvest. We like talking about weather in England but we also really like talking about Brazilian weather in the coffee industry! The combination of reduced rainfall and high temperatures posed a potential risk to the crop, although it’s worth noting that the 2024/2025 Brazilian crop was anticipated to be large. This did not stop the market falling towards the end of the month however.

Flowering in Brazil


Nor did it stop the market hitting the yearly low of 145 c/lb on the 10th of October! However, as you can see from the graph below, we did not stay there for long. The coffee market spent the last quarter zooming up to briefly breach 200 c/lb before closing the year out at 188.30 c/lb (losing 8.9 c/lb on the final day of the year)


However, it was not just the market that was zooming up. Both the Euro and the Pound continued their momentum from October and finished the year strongly. Moody’s downgraded the outlook of the US Credit rating pointing to significant deficits, increasing interest costs and political uncertainties. This weighed heavily on the Greenback till a brief pullback before shooting back up as we entered December, finishing the year 1.10 and 1.27 respectively.


Mercon Coffee Group, a trader with operations in over nine countries, filed for bankruptcy. This news was most keenly felt in Nicaragua, where Mercon had the highest market share. The uncertainty around the future of the business continued into the New Year. The market also began to discuss when, not if, the Fed would cut rates in 2024. Let’s see what this year brings, cheers!