Mintec’s three-month ahead price of Arabica coffee at the InterContinental Exchange (ICE) NY closed at USc 137/Ib during the week of 3rd March 2021. This was the highest weekly average since August 2017, maintaining a rally that started at USc 124.6/Ib on 17th February 2021. Firm pricing was partly attributed to local weather reports concerning prevalent dry conditions in the main Arabica-growing state of Mina Gerais. Brazil is entering its 2021/22 Arabica off-season crop, which has already been exposed to extreme aridity during the crucial flowering stage. The crop is now entering the final development stages, where adequate rainfall is crucial for improving bean sizes and quality. Local weather forecasts predict continued dryness over the coming weeks, fuelling projections of a potentially decade-high global coffee deficit.
Improved demand expectations also provided price support, with investors increasingly optimistic that out-of-home Arabica consumption will increase, as lockdowns ease, in line with COVID-19 vaccine developments. US President Biden’s USD 1.9 trillion stimulus package was signed off on 10th March 2021, further strengthening demand fundamentals. Upside price risk is further enhanced via a potentially weaker USD, due to the stimulus plan liquidity boost, and improved global appetite for riskier currency investments. When the greenback is weaker against the BRL, USD-denominated coffee prices gain value and vice-versa.