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Brazil coffee oversupply to hit PNG/Vanuatu

Global production to exceed demand in 2014

As global supply exceeds demand for coffee for a fourth straight year, small world producers like Papua New Guinea and to lesser extent Vanuatu will feel the pinch of exports dwindling in 2014 in the US$70 billion world market. The latest twist and turn on the world coffee scene will have a devastating blow on PNG— which though a small player by global standard —has nearly 2.5 million workers employed in the industry at home from roadside stallholders to large corporations relying on rich export revenue. At the start of 2014, the world coffee futures fell, capping the longest run of annual declines in two decades, on fears of a global glut because of oversupply from the world’s largest producer, Brazil. Unlike some industry world markets like petroleum fuel, where leading producers form a cartel and restrict supplies to stimulate product price and maintain high returns with limited sales over prolonged periods of time, coffee producing nations have been too busy competing with each other. Ideal weather late in 2014 in Brazil’s Sao Paulo and Parana states—the two mega coffee producing regions—have helped yield bumper crops raising hopes that the nation’s available exports will hit 49.2 million bags, surpassing the previous estimate of 47.5 million. “Global production is set to exceed demand for the fourth straight season, pushing inventories to a five-year high,” noted the United States Department of Agriculture early January.

Coffee integral to PNG: After peaking in 1998, when coffee was responsible for 38% of the country’s non-mineral, both production and sales have steadily shrunk in PNG. The United Nations Conference on Trade and Development (UNCTAD) estimates that after palm oil, coffee is PNG’s second largest export. It is the highest foreign exchange earner for the country, with majority of farms scattered in the Western Highland province.

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