Coffee prices seen rising slightly by end-2020 despite higher surplus

[NEW YORK] Coffee prices, both for arabica and robusta futures, are seen rising slightly by the end of 2020 from current values despite an overall view of a larger surplus in the 2020-21 season, a Reuters poll of nine traders and analysts showed on Monday.

Arabica futures are seen finishing the year at US$1.20 per pound, 0.9 per cent higher than the settlement on Friday, while robusta futures are seen at US$1,390 per tonne at end-December, 3.42 per cent up from last week's settlement.

"Challenging times for many commodities," said futures strategist Stephen Platt, citing the influence of stimulative policies in one side and the impact in demand caused by the coronavirus pandemic in the other.

"The virus has likely helped consumption of lower quality coffee in key consumers including Brazil while decline in institutional sales in industrialized consumers being partially offset by higher consumption at home," he said.

The experts see a global coffee surplus growing from 1.85 million 60-kg bags in 2019-20 to 5 million bags in 2020-21, mostly due to a larger supply of arabicas amid weaker demand for the high-quality variety. Coffee shops around the world, which stayed closed for months, mostly use arabicas.

A European-based broker sees currencies playing a roll in pricing, believing the Brazilian real has touched a bottom during the pandemic and should recover, which would limit future coffee sales from the No 1 producer and support prices.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Traders and analysts see increased consumption of robusta coffee due to higher buying at supermarkets. Popular retail brands usually have a higher robusta content in the blend. Instant coffee, as well, is produced almost entirely with that variety.

They see global robusta balance at a deficit of 1 million bags in 2020-21, while they expect arabica balance to post a surplus of 5.9 million bags.

Among the largest producers, Brazil is seen harvesting a record crop of 68 million bags in 2020-21, while Vietnam is seen producing 29.2 million bags.

REUTERS