Prices for Arabica coffee in July 2021 surged to the highest levels since November 2014, severe frost hit Brazilian coffee farms, and concerns grow over weather phenomena in numerous producing countries
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We have already talked about the weather conditions in Brazil, and the following – which is is an excerpt from the ICO market report of July 2021 – focuses mainly on the prices of Arabica coffee and on the severe frost that hit Brazil:
Coffee prices continued to increase in July 2021, with the Arabica variety reaching its highest levels since November 2014, as concerns grew about the current and future availability of many origins, especially the world’s largest producer, Brazil, which suffered a severe frost on July 20. As a result, market volatility increased. The monthly average of the ICO composite indicator reached 152.24 US cents/lb in July 2021, its highest level since 162.17 US cents/lb recorded in November 2014. Compared with the monthly average in October 2020, the beginning of the current coffee year, the level reached in July 2021 represents an increase of 43.8%.
Prices of all four groups of coffee have recorded substantial increases. This upward trend of coffee prices over the first 10 months of coffee year 2020/21 seems to confirm a net recovery from the low-price levels that have dominated the world market since coffee year 2017/18. The price performance has also been driven by brighter prospects for demand, as pandemic-related restriction measures are being removed in major consuming markets and the development of vaccination programmes is enabling a progressive return to normal economic activity.
In terms of market fundamentals, exports of all forms of coffee by all exporting countries to all destinations totalled 11.2 million 60-kg bags in June 2021, an increase of 4.1% compared with 10.8 million bags in June 2020. The level of total exports in June 2021 mirrored the volume of 11.2 million bags recorded in June 2019, before the pandemic. Social unrest affecting transportation logistics in some origins, particularly Colombia, has ended.
Moreover, with the gradual introduction of vaccination programs, covid-19 pandemic-related restriction measures affecting people’s movement have been eased in many exporting countries. Total exports of all forms of coffee over the first nine months of coffee year 2020/21 amounted to 98.6 million bags, an increase of 2.5% compared with 96.1 million bags during the same period in coffee year 2019/20. Cumulative exports from July 2020 to June 2021 are estimated at 129.7 million bags, an increase of 0.6% compared with the 129 million bags recorded from July 2019 to June 2020.
World consumption for coffee year 2020/21 is projected at 167.58 million bags, an increase of 1.9% on its level of 164.43 million bags in coffee year 2019/20. The projection for total production in coffee year 2020/21 remains unchanged at 169.60 million bags, 2 Coffee Market Report – July 2021 representing a 0.3% increase on 168.94 million bags harvested in coffee year 2019/20. However, with substantial reduction of output from Brazil and many other origins affected by climate-related shocks, combined with increasing demand, the supply/demand ratio is expected to reverse from coffee year 2021/22 onward.
ICO. (2021). Coffee Market Report July 2021. Retrieved from https://www.ico.org/documents/cy2020-21/cmr-0721-e.pdf
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