The price of beans traded on the New York ICE increased by 14% w-o-w to 25th March to $2.69/kg, representing 16% y-o-y growth. Coffee prices have rallied, as the coronavirus pandemic has prompted a rise in home-brewed consumption. However, prices remain volatile and, in the week ending 8th April, the same benchmark dipped to $2.63/kg, losing 2% against the March peak. Notwithstanding, prices remain substantially above the 2020 low of $2.24/kg recorded in early February, when the first impacts of the pandemic were felt.
Global coffee demand is waning during the current crisis, albeit via altered consumption patterns. Thin orders from restaurants, coffee chains and artisan outlets are being partially replaced by demand for instant blends sold at supermarkets and convenience stores. The swing towards home consumption is underpinned by domestic stockpiling, with caffeine-hungry consumers fearing supply disruptions. However, the rise in home consumption lags the typical volumes of buying attributable to the large chains.
On the supply side, a record Brazilian crop is widely expected in the 2020/21 season. Production in Brazil, the world’s top arabica producer and exporter, has benefited in recent years from technological innovations, such as machine-based harvesting, as opposed to manual that is widely practised in the rest of the world. Thus, the global supply balance is expected to widen in H2 2020, notwithstanding a likely demand rebound, as countries slowly emerge from lockdown. A bearish price outlook is anticipated for the next 6-12 months based on these fundamentals.