Coffee fundamentals indicate deteriorating demand and oversupplied conditions could soon pressure prices to 15-year lows.
A global surplus of 3.5 million bags is expected in 2020-21 as Brazil expects a record crop after a lower yield in 2019. To some degree, this had been anticipated by the market. Adding to concerns about a bulging supply imbalance, the Brazilian real has dropped 5% in the last few weeks versus the U.S. dollar.
Coffee farmers in Brazil who fear continued real weakness have an incentive to deliver more and more coffee for export, even at the current low prices. Expectations for demand growth, the one positive variable that had supported price increases, have been dialed back in light of the global pandemic.
Recent data from the International Coffee Organization revealed global arabica coffee exports of 82.75 million bags in 2019, a six percent increase over 2018, and growth had been expected to continue in 2020 until lockdowns tempered the optimism. – a Charles Schwab commodity report said, seen by FXStreet. Now knowing the bearish fundamental backdrop, Reuters Commodity Desk forecasts a significant “downward wave (c) ” that could result in coffee prices reaching $0.6380 per lb in the first half of 2021.
We can’t even go to Peru these days, but we’re hoping to soon. San Martin, where we are based, is under a stricter lockdown, and no flights are being allowed, and no firm date as to when flights will return.