In its most recent supply and demand estimates for 2020/21 (released in December 2020), the US Department for Agriculture (USDA) projects total global coffee output to increase by 2.3% y-o-y to 4.77 million, presenting a 0.6% downward revision to the June 2020 outlook. Global arabica production is predicted to increase by 52,000 tonnes (+1.6%) y-o-y to 3.25 million tonnes, while robusta production is forecast to increase by 151,000 tonnes (+5.9%) y-o-y to 2.73 million tonnes.
Brazilian arabica output is estimated to increase by 348,000 tonnes (+13.8%) y-o-y in 2020/21 to 2.87 million tonnes, based on optimal weather and strong yields. The 2020/21 arabica crop is expected to be its second-largest ever, behind the 2.98 million tonnes produced during the last biennial ‘on year’ of 2018/19. However, the outlook for the 2021/22 crop outlook is less robust and could conceivably fall by 50% y-o-y, due to pervasive drought affecting the main growing regions during the crucial development stage.
Hurricanes Eta and Iota swept through Central America during the early stages of the arabica harvest in November 2020. While the full crop impact is yet to be determined, the International Coffee Organisation (ICO) expects around 3% of Honduran arabica production (approximately 10,000-15,000 tonnes) will be lost on account of the storms. Prior to the storms, Honduran output was predicted to increase by 44,000 tonnes (+13.4%) y-o-y, based on favourable growing conditions and yields improvements.
The Brazilian robusta harvest is forecast to increase by 96,000 tonnes (+8.6%) y-o-y to 1.21 million tonnes in 2020/21, offsetting an expected decline from Vietnam, the world’s largest producer. Vietnam’s robusta harvest for the 2020/21 season is predicted to contract by 132,000 tonnes (-7.3%) y-o-y to 1.68 million tonnes. The shortfall is attributed to extreme aridity during the typical rainy season, while low profitability is disincentivizing farmers to invest in yield-boosting technology. Subsequent heavy rains have also impeded harvesting activities.
Speculation surrounding the supply tightness lifted arabica futures prices at the NY InterContinental Exchange (ICE) by 12% to USc 1.19/Ib during the six-weeks to 16th December 2020. Meanwhile, robusta futures at the London ICE gained 1% in the week to 16th December 2020, to USD 1,367/tonnes, continuing the volatile trend of the previous four weeks.