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Chinas Move to Devalue Currency Adversely Impacts Leading Coffee Producing Countries

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Published on : Aug 27, 2015

China’s decision to devalue its currency has adversely impacted the currencies of other emerging economies, some of whom are leading coffee producers in the world, including Vietnam’s dong, Columbia’s peso, and Brazil’s real. 


Coffee is not spared by the global sell-off in commodities either. In a week’s time since sell-off the composite price indicator in the International Coffee Organization dropped below 9.4% of its value. Monday alone registered a decline by 2.2%. However, the adverse impact is not limited to the currency alone, the supply side of manufacturing is also facing the negative implications of declining prices. According to a report published recently by ICO, the supply concerns shrouding Brazil’s coffee crop have subsided. The total amount of coffee exported in June this year from the country was 9.7 million bags, with 1 bag carrying 60 kilos. This registered a 3.3% drop compared to the estimates of the previous year, however was the second largest export for Brazil’s economy in June. 


While coffee exports from Brazil has reached at record levels, the export records in Vietnam registered a significant a decline since farmer’s stored back stocks due to lower prices. But the recent devaluation of dong, which has declined by 2.8% this month, is likely to give more incentive to coffee export, even though devaluation is expected in forthcoming months, as reported by Bloomberg.


In India, however the post-blossom coffee estimate for 2015-2016 projects a healthy growth of 9% in terms of output. This however, is subject to post-monsoon weather conditions. So far, the export calendar for coffee from India has been relatively flatter compared to last year. The coffee exporters in India has been at a disadvantage because rupee has been outperforming the currencies of other emerging markets. 


Nevertheless, the stocks of coffee plantation companies in Vietnam have been performing better since the last year. This trend has been buoyed by news reports that government is likely to allow foreign direct investment in the country in coffee plantations.