London - Global coffee demand growth is slowing as emerging economies face growing headwinds, putting expectations on ice that Brazil will overtake the United States to be the world's top consumer.
Asia continues to spearhead rising demand for coffee, but fears over the Chinese economic slowdown will curb growth rates seen over the last several years.
“Asian countries are driving consumption growth in coffee, but the problem is that struggling economies will slow down the growth seen in the last decade, especially in China and India,” said Stefan Uhlenbrock, a senior soft commodities analyst with FO Licht.
Kona Haque, head of research at ED&F Man, said she expected Asia and Africa to remain the forces of coffee consumption growth, but said the quality of coffee could drop where consumers were hurting most from the economic downturn.
Among the emerging economies that have led coffee demand growth in recent years, Brazil is now the weakest link, traders said.
The coffee trade has long held the view that Brazil's rapid economic expansion in recent years would propel it to overtake the United States to become the world's biggest consumer, while it is also top coffee producer in the world.
But those expectations have now been put on hold.
“Brazil is one of the areas where consumption adjustments may be needed,” Haque said. “Brazil will struggle to see consumption growth on the scale it was seeing.”
Carlos Mera, a senior commodities analyst with Rabobank, said, “Up to a year ago we were all expecting Brazil to overtake the U.S. and become the No. 1 coffee consuming country in the world. But that is not going to happen as soon as we expected.”
Nathan Herszkowicz, executive director of the Brazilian Coffee Industry Association (ABIC), told Reuters he did not expect local coffee consumption to grow in Brazil in current economic conditions.
“It is not likely to fall either but should stay stable at 20.3 million bags, which is what it was last year,” he said.
“There has been a drop in demand from some segments such as restaurants and cafes, with people going out less.”
FO Licht expects global coffee consumption to grow by 1-1.5 percent in 2015/16, compared with 1.5 percent growth in 2014/15 and 2 percent growth in 2013/14.
Rabobank forecasts global coffee consumption growth of 1.6 percent in 2015, down from 1.7 percent in 2014 and 2.7 percent in 2013.
The International Coffee Organisation estimates consumption has grown by an average of 2.3 percent a year since 2011.
REUTERS