(Bloomberg) -- The world’s largest coffee trader said demand is “facing significant headwinds” even as roasters have been slow to pass on price increases to consumers.
Neumann Gruppe GmbH expects consumption to remain depressed in the 2024-25 season that started in October in most countries, according to a report seen by Bloomberg. Demand is unlikely to rebound as a rally that sent futures traded in New York to a record high will force roasters to further increase the price charged to consumers.
Arabica coffee, the premium type favored by Starbucks Corp., has rallied about 70% this year as global supplies fall short of demand. While futures climbed to a record on Tuesday, the impact on consumers tends to be delayed as many roasters hedge as far ahead as 12 to 18 months.
“We believe that global demand is facing significant headwinds despite a very lagged and slow pass-through of green coffee prices to consumers,” Neumann said in the report. “The current price level will necessitate further consumer price increases and reinforces our view.”
Coffee demand is set to remain below 170 million bags in the 2024-25 season, flat from a year earlier, but supplies are so tight the market will still face a global shortage of 2 million bags, Neumann forecasts. That reverses an estimated surplus of 2.6 million bags in the 2023-24 season that recently ended.
Global consumption fell for the first time during the pandemic, and while emerging markets have recovered, demand in mature markets in Europe and North America are still below pre-Covid levels, according to the report.
Neumann didn’t publish figures for the 2025-26 season but said there are indications that “point more to a global balance than another consecutive (possibly untenable) global deficit for 2025-26,” according to the report.
The trader also didn’t provide a forecast for Brazil’s 2025-26 crop, but said “observations to date support our long-held view that the arabica cherry set will be subpar,” with a crop likely to be toward 40 million bags.
Neumann’s outlook comes a day after Volcafe Ltd., the coffee unit of trader ED&F Man Holdings Ltd., said global coffee production is on track to fall short of demand by 8.5 million bags in the 2025-26 season, marking an unprecedented fifth year of deficits. The trader slashed its outlook for the Brazilian arabica coffee by 11 million bags to 34.4 million bags.
A bag of coffee weighs 60 kilograms, or 132 pounds.
Arabica futures rose as much as 5.5% to a record of $3.4835 a pound Tuesday after Volcafe’s outlook. Futures retreated more than 4% on Wednesday.
(Updates with details on consumption in sixth paragraph.)
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