Weekly Market Report – 11 April 2021

As suggested last week, prices on the both markets rebounded this week, although the bounce was not sufficient to recover all of the ground lost the week before. One of the factors behind the jump was a report from Citibank predicting that as a result of the global deficit, prices would rise dramatically. There were also reports published this week that suggest that demand will bounce back strongly over the next few months as things start to return to normal following the lifting of pandemic induced restrictions. Arabica coffee prices gained 5.60 cents/lb while robusta coffee prices rose $13/ton (0.55 cents/lb). In the absence of local market distortions, roadside parchment coffee prices in Papua New Guinea over the week to come will probably be around 40 to 45 toea/kg higher than what they were last week.

The bulk of the price rise this week can be attributed to a report by Volcafe which suggested that there will be an 11.6 million bag deficit in the 2021/22 season due to the downturn in Brazilian output. Citibank citing these figures has suggested that this should push prices up to between 140 and 150 US cents/lb. A report published this week by the NCA has suggested that the pandemic has pushed at-home consumption to record levels in America. The study reported that 85% of coffee drinkers had at least one cup at home (up 8% since January 2020) and that the average daily consumption remained steady at nearly 2 cups per capita. Furthermore, the study found that more than 60% of Americans prefer to drink coffee each day rather than any other beverage and this includes tap water. Out of home consumption however has been impacted especially workplace coffee consumption, which is down 55% since January 2020). However, on-the-go options are flourishing, with drive through and app-based ordering both up 30%. Interestingly more than 40% of Americans bought types of coffee that they had never tried before during the pandemic, and nearly one third tried to replicate a favourite coffee shop beverage at home. One-quarter of Americans purchased new coffee formats (e.g., trying single cups, instant, ground, or whole beans), and nearly one-quarter purchased a new home coffee machine.

There continues to be no reliable regularly-published data on coffee price differentials that I have access to, so once again I have had to use sources, the accuracy of which cannot be guaranteed. These other sources suggest that movements in physical price differentials have been positive. Brazilian 3 /4’s, appear to be higher at around minus 20; Honduras HG’s, appear to be up slightly at plus 23; Kenya AB FAQ’s continue to be stable at plus 105/110; Colombian UGQ’s maybe slightly higher at plus 52; while PNG Y1’s appear to be unmoved at plus 8. If an exporter had fixed a price on Friday for July/August delivery, he should have secured a price somewhere between 136.80 and 138.70 cents/lb.

Although the bounce this week is very encouraging, prices have not really moved that much over the past month or so and are still significantly lower than they were 2 months ago. This is somewhat surprising given that there is now widespread consensus that that there will be a shortage next year and that stocks will have to be used to cover the deficit. However, it appears that concerns over the impact that the pandemic has had on consumption is the limiting factor here and that until there is clear evidence that the world is on top of the virus in all countries, such concerns will remain. Consequently, while there is every possibility that prices will continue to rise next week, the increase is likely to be relatively modest.

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