Will supply issues ever push arabica-robusta prices to parity?

  • Robusta prices hit a 28-year high in June 2023
  • Increased demand and lower crop yields continue to push up robusta prices
  • While any kind of equilibrium is extremely unlikely, robusta prices have come a long way

THE GROWING demand for cost-effective robusta coffee is driving up its prices, while arabica prices remain low. But is there any chance that the market prices for arabica and robusta will equalise?

In June 2023, robusta prices hit a 28-year high, contributing to a narrowing arabica-robusta differential. The International Coffee Organization’s June 2023 market report states that “average prices for all group indicators decreased in June 2023, with the Robustas being an exception and gaining 7.8%, averaging 132.13 US cents/lb”.

Now under high inflationary pressure, more roasters are choosing robusta as it is cheaper and can be used in most baseline blends. As such, demand is up.

But as well as increases in demand, robusta has also faced some supply issues. El Niño is causing uncertainty, with Brazil possibly facing heavy rainfall while India could undergo an extended period of drought. As such, Volcafe predicts a record deficit of 5.6 million bags in the 2023/24 crop year.

Finally, ICO’s June market report also highlighted a significant 24.6% rise in soluble coffee exports in May, intensifying the demand for robusta (commonly used to make soluble coffee). The convergence of these factors has triggered a “robusta rush”, as a result of increased demand and supply issues.

robusta prices are affected by weather forecasts

The arabica-robusta investment gap

Robusta is appealing to farmers because of its relatively lower production costs compared to arabica. It thrives at lower altitudes and in warmer climates, and is more resilient to pests and diseases.

This makes it a cost-effective choice for farmers, reducing the need for expensive inputs and minimising crop loss risks. As a result, robusta is a safer option in the face of predictions about the diminishing amount of land available for arabica cultivation.

Today, some coffee farmers are shifting from arabica to robusta crops, or beginning parallel production to derisk their operations. However, some of these farmers are facing challenges.

“If a farmer is switching to a new crop, they may not have access to best quality plants, or the right network of support – it will be hard,’ says Hanna Neuschwander, director of strategy and communications at World Coffee Research.

She says that farmers need an enabling environment. This means access to markets, wet mills, infrastructure, roads, information, and technical assistance, at the very least. Without these factors, farmers are venturing into the unknown – which heightens risk and makes a guaranteed return on investment less likely.

For example, the sheer volume of information available about arabica has come about as a result of decades of extensive research. In contrast, robusta – long since dismissed as a cheap commodity – lacks the same level of R+D, and its potential remains largely unexplored. 

“Arabica has been commercially traded for about 500 to 600 years, and robusta only 150,’ says Hanna. “It makes sense that it should be behind, but I see a parallel journey developing.”

Hanna points to the limited investment in agricultural R&D and innovation, except for Brazil and Vietnam, both of which are leaders in robusta production. Other countries have historically lacked the institutional capacity for similar efforts.

Today, the investment gap is narrowing due to declining coffee supplies, increased demand for robusta, and the growing recognition of fine robusta in the specialty coffee sector. “Five years ago, nobody was talking about robusta,’ says Hanna. “Now we’re seeing more investment because there’s demand for it – partly driven by new market dynamics.

“But it remains to be seen how this will play out – we’re still at the development of differentiation stage with robusta.”

differentiation will help boost robusta prices

Robusta R+D is needed

In reality, any kind of price equilibrium is unlikely to occur for robusta and arabica, even in the long term.

“In the absence of a technological leap that dramatically improves arabica productivity or some new extreme change in the perception of robusta, it seems unlikely that commodity arabica will be worth less than commodity robusta,” says Andrew Hetzel, coffee expert and market analysis consultant. 

“Robusta is more adaptive and substantially more productive, so all other things being equal, it’s bound to be worth less.”

However, although global parity is unlikely, Andrew does say that he has observed specific instances of localised price inversion. He highlights at least one instance where robusta crops have held more value than arabica on a regional level.

“The 2016/17 conilon crop (the Brazilian term for robusta) fell short of expected quantities due to severe drought in Espirito Santo, the main robusta-producing state,” he says. “Demand for robusta in domestic consumption, however, remained high and growing. This briefly caused the price of robusta to surpass arabica on Brazil’s internal market.

“I suspect this may have happened elsewhere – or certainly might again.”

Today, specific specialty robusta lots fetch higher prices per weight than commodity arabicas, and even certain differentiated lots.

“Miguel Meza’s Paradise Coffee robusta is a good example,” Andrew says. “He’s paid at least $5 per pound for robusta in the past, and up to $11 per pound. $5 puts any coffee in rarefied air with the Kenyans, Ethiopia, and Antigua – and probably double or more the price of a typical 82-point Brazil arabica.”

Nonetheless, Andrew points to a promising future for robusta. “I’m quite excited about how far coffees like this have come in the past few years alone,” he says.

Ongoing robusta research is enhancing its viability. World Coffee Research’s recently-launched Robusta Variety Catalog provides robusta farmers with a new open-access resource. It profiles 47 robusta varieties using over 20 variables.

“Basic levels of investment in R&D, training and knowledge building need to happen to help farmers keep doing what they’re doing, and to sustainably grow operations,” says Hanna. 

It’s unlikely that robusta will ever replace arabica in terms of price or flavour profile, despite the current “robusta rush”. But while developing and differentiating will take time, one thing is becoming increasingly clear – it has a big role to play in the coffee industry’s future.