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Beverage prices ease as supplies increase and demand softens

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image of a fresh cup of coffee set against a background of a coffee plantation.
Photo: ©DONOT6_STUDIO/Shutterstock

This blog is the fifth in a series of 11 blogs on commodity market developments, elaborating on themes discussed in the October 2022 edition of the World Bank’s Commodity Markets Outlook.

The World Bank’s beverage price index declined further in November, down nearly 12% from its August high. Following an estimated 16% increase in 2022, the index is expected to ease in 2023 as supplies increase and demand weakens in response to deteriorating global growth prospects.

Arabica and Robusta coffee prices reached a 16-month low in November. However, prices are still 23% (Arabica) and 10% (Robusta) above the five-year average , mostly in response to last year’s sharp output decline due to Brazil’s weather-induced shortfall, which caused an 8% decline in global coffee production. An expected supply increase this year will partly compensate for last year’s losses. However, the ongoing La Niña effect (the third in a row) presents a risk to South American coffee production, as Brazil and Colombia account for a combined 45% of global coffee supplies and 55% of Arabica supplies. On the demand side, the coffee market is facing headwinds due to the worsening global economic outlook, with demand in 2022-23 expected to contract by 1%. Following gains in 2022, Arabica and Robusta prices are expected to decline markedly in 2023, as supplies are replenished. Intensification of La Niña and a more severe downturn of the global economy present key upside and downside price risks, respectively.

Cocoa prices inched up in November, following declines earlier in the year. Robust global supplies, especially from Côte d’Ivoire, the world’s largest supplier, have kept cocoa prices within a tight band ($2.30-2.60/kg) during the past two years. The 2022-23 season’s global crop is also expected to be strong, estimated at more than 5 mmt, slightly higher than last season’s 4.9 mmt. In view of adequate global supplies and a slowdown in demand, cocoa prices are expected to ease in 2023, after a projected decline of 3% this year.  Barring adverse weather in West Africa (the world’s key cocoa supply region), price risks are tilted to the downside, reflecting headwinds to global growth.

Following gains earlier in the year, tea prices weakened in October and November, especially at the Colombo and Kolkata auctions. The easing of tea prices reflects improved supply prospects in India along headwinds from the demand side.  Supplies, however, are still low in key producing countries and regions. In Sri Lanka, supplies are constrained by the high costs and scarcity of key inputs, in part due to an import ban on fertilizers. In East Africa, supplies have been impacted by persisting drought conditions. Following a projected 15% increase in 2022, tea prices (the three-auction average) are expected to decline nearly 10% in 2023, as new supplies come online and a reduction in consumption accelerates in several Eastern Europe and Central Asia countries.


John Baffes

Senior Agriculture Economist, Development Economics Prospects Group

Kaltrina Temaj

Research Analyst, Prospects Group, World Bank

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