Brazil’s next coffee crop is likely to be much smaller than the last, boosting the C price (photo: CIAT)
Arabica coffee prices reached 14-month highs towards the end of February, climbing quickly past pre-Covid-19 levels, although it fell somewhat toward the end of the month and in early March 2021. As Commerzbank Research agricultural analyst Dr. Michaela Helbing-Kuhl told STiR coffee and tea, prior to the coronavirus pandemic, in December 2019, arabica coffee peaked at a US$1.40 per pound. But then, the price slumped.
Concerns about the effect of lockdown on out-of-home consumption and a record-high Brazilian coffee crop in 2020 saw arabica at or around the $1.00 per pound level for many months, but it entered into a clear upward trajectory in mid-February 2021, Dr. Helbing-Kuhl said. From a level of around $1.21 in mid-February, it took to just shy of $1.40 toward the end of the month. Dr. Helbing-Kuhl said the price of robusta coffee has also picked up, although September 2019 saw it trading a touch higher than the late February level it achieved of US$1,460/ton.
As Dr. Helbing-Kuhl explained, apart from the perception that lockdowns will be eased and vaccination will lead to near-normal out-of-home consumption, the price spike has been driven by predictions that the next Brazilian crop will be a small one, with the country entering an “off” year for arabica production. An already small crop is likely to be smaller still as a result of drought during the flowering period.
Early estimates from Conab, Brazil’s agricultural statistics agency, put the next crop between 21.4 - 30.5% lower than was achieved in 2020, which was a record year with 63 million bags produced. In January 2021 it said production was likely to be between 43.9 - 49.6 million bags of arabica and robusta. More recent estimates have suggested that the next Brazilian coffee crop could be lower still – forecasts of an arabica crop of fewer than 30 million bags have been issued, this being the lowest since 2007/08.
Dr. Helbing-Kuhl said that apart from a small crop in Brazil, the positive effect on consumption of vaccinations and fiscal stimulus programs, containers used to transport coffee and other products remain in short supply and are expensive. “Some observers are therefore raising their deficit expectations for 2021/22, in some cases to over 10 million bags,” she said, “albeit following surpluses in 2019/20 and in the 2020/21 season, which the International Coffee Organization estimated at the beginning of this month at 4.1 million and 5.3 million bags, respectively.”
In February 2021, the ICO composite indicator continued its upward trend, averaging 119.35 US cents/lb as prices for all group indicators rose. This was the highest monthly average since October 2017 when the ICO composite indicator reached 120.01 US cents/lb.