Will Arabica and Robusta Ever Reach Price Parity?
Introduction :The Coffee Conundrum: Will Arabica and Robusta Ever Reach Price Parity?
The world of coffee is in the midst of a brewing transformation, and the spotlight is on the age-old battle between Arabica and Robusta. Robusta coffee prices hit a 28-year high in June 2023, driven by increased demand and a series of supply issues. In this blog, we’ll delve into the current dynamics of the coffee market, explore the factors influencing the prices of these two coffee varieties, and contemplate whether they will ever reach price parity.
Robusta’s Rise
Robusta, often considered the underdog of the coffee world, is gaining prominence due to its cost-effectiveness and versatility. With lower production costs, resilience to pests and diseases, and the ability to thrive at lower altitudes and in warmer climates, it’s no wonder that coffee farmers are increasingly turning to Robusta. This shift is partly a response to concerns about the diminishing availability of land suitable for Arabica cultivation.
However, the transition from Arabica to Robusta isn’t always smooth for farmers. They need access to essential resources and support systems like markets, wet mills, infrastructure, roads, information, and technical assistance to ensure a successful switch.
Arabica’s extensive research history has resulted in a wealth of knowledge, while Robusta has been somewhat neglected. Nevertheless, the investment gap is narrowing, thanks to declining coffee supplies and the rising demand for Robusta in the specialty coffee sector.
Supply Issues and Increased Demand
Robusta has been grappling with supply issues, such as the unpredictability brought about by El Niño. Brazil faces heavy rainfall, and India anticipates an extended drought period, contributing to a projected record deficit of 5.6 million bags in the 2023/24 crop year.
Additionally, a 24.6% rise in soluble coffee exports in May has intensified the demand for Robusta, as it is commonly used in making soluble coffee.
The “Robusta Rush”
Under high inflationary pressure, more coffee roasters are opting for Robusta due to its affordability and compatibility with baseline blends. This surge in demand, coupled with supply issues, has set the stage for what is being called the “Robusta Rush.” Robusta prices have soared, and Arabica is struggling to keep up.
Price Equilibrium: A Distant Dream
The question remains: will Arabica and Robusta ever reach price parity? While global parity may be unlikely due to the inherent differences between the two coffee varieties, specific instances of localised price inversion have been observed. For example, in 2016/17, severe drought in Brazil’s main Robusta-producing state caused Robusta prices to surpass Arabica on the domestic market.
In the specialty coffee sector, specific Robusta lots are fetching higher prices per weight than commodity Arabicas, highlighting the potential of this once-neglected variety. Ongoing research and development efforts are enhancing Robusta’s viability, making it an exciting prospect for the future.
Conclusion
While the idea of Arabica and Robusta reaching price parity on a global scale might remain a dream, the coffee industry is undergoing significant changes. The “Robusta Rush” and the increasing recognition of fine Robusta in the specialty coffee sector are altering the landscape.
With investment in research and development, training, and knowledge building, Robusta’s future looks promising. It may not replace Arabica in terms of price or flavor profile, but one thing is clear: Robusta has a significant role to play in the coffee industry’s future.
At Servicoff Limited, we’re keeping a close eye on these developments, and we’re excited to explore the world of coffee with you. Join us in celebrating the rich diversity of coffee varieties and the evolving coffee market.
