Coffee Outlook Q1 2021: Still a Lot of Coffee Around
Imports of coffee declined 3.3% in 2020, mainly as a result of lower consumption. However, the future looks bright for the coffee sector, with new ways of selling coffee and interacting with coffee consumers. Meanwhile, the supply and trade is now facing fresh challenges: a decline in production in key producer Brazil, speculators being more active than ever across commodities and astronomical container shipping rates. When it comes to the concerns about the expected drop in Brazil next season, the market is still working with a large pile of stocks from Brazil’s last harvest. Given the current surplus of over 10m bags, we would expect prices to drop, but funds, weather in Brazil, and higher working stocks could lead to higher prices.
- Brazil continued to flood ICE-certified stocks beyond our initial expectations, with over 0.74m bags currently certified and almost 0.07m pending grading. This poses a sharp contrast between current availability of Brazilian coffee and the expected shortfall in the 2021/22 season.
-We reduce our Brazil 2021/22 estimate to 56.2m bags (of which 36m bags of arabica), given the continued drier-than-normal weather in Brazil.
- Border disruptions and astronomical container shipping rates increase appetite for processors to increase inventories.
- The outlook for premium coffee and for post-Covid coffee demand in general remains strong.