18 de Feb 2021 | Coffee
Coffee, a survivor of the pandemic
With the restrictions that followed the pandemic, coffee consumption and exports were shaken. And the income of coffee growers varied in each country according to the stability of their currencies against the dollar, as well as the quality and quantity of their crops.
With the closure of cafes and offices around the world due to the pandemic, the global grain market feared an especially sour 2020. But the big producers saved the year with a blend recipe: a combination of prices, record harvests and alternative consumption in households.
Lower production
"2020 was particularly good for Brazil, but not so good for the other countries in terms of production," says Carlos Mera, an analyst at RaboBank in London.
The world's largest producer celebrated a record harvest last year: 63.08 million 60-kilo bags, 27% more than in 2019, according to the National Supply Company.
77% of Brazilian coffee is of the Arabica variety, of better quality than the robusta.
On the other hand, Vietnam, the largest producer of the latter type, will harvest 7% less in 2020/2021 than the unpublished harvest of the previous period. Dry weather brought production down to 29 million bags, according to the United States Department of Agriculture.
Mecca of the best soft coffee in the world, Colombia also decreased its production by 6% in 2020, with 13.9 million bags, according to the National Federation of Coffee Growers.
With Ethiopia leading the way among a score of countries, Africa passed the year uneventfully.
The continent "is very stable because there is a lot of distance between the countries, different climates, they do not suffer as much from prices because production is more extensive and there are lower fertilizer costs," Mera describes.
The world produced 0.9% less coffee in 2019/2020 compared to the previous period.
Best price
With the restrictions that followed the pandemic, consumption and exports were shaken. And the income of the coffee growers varied in each country according to the stability of their currencies against the dollar, as well as the quality and quantity of their crops.
Although the international price gave a respite.
Arabica coffee traded on the New York Stock Exchange at an average of US $ 1.10 a pound, a recovery from 2019, when it hit lows of less than a dollar.
Brazil raised the cup high. Added to its bulky production was a 29% depreciation of the real against the dollar.
In Colombia, some 540,000 coffee families felt relief thanks also to the depreciation of their currency (4.7%).
The value of the harvest was about US $ 2.6 billion, the "highest in the last 20 years" taking into account inflation, said a federation official.
"The price of coffee is volatile, it changes sometimes too much and very quickly, but 2020 was extraordinary in current prices, without becoming a bonanza," explains economist and researcher Rodolfo Suárez, from the National University of Colombia.
“Futures” are traded on the New York and London Stock Exchanges, contracts with estimates of the price of coffee, to protect buyer and seller from fluctuations, as soon as the cargo reaches its destination or finds a customer.
But they are also traded at the convenience of a broker. According to Fernando Morales-De La Cruz, from the Café for Change organization, "the 2020 price in real terms was almost 70% less than the 1983 price of coffee" when it was US $ 1.40.
In terms of price, Vietnam took a bitter sip. "The price in dollars for robusta was quite disappointing for Vietnamese producers, the harvest is lower than expected and the price, due to having a currency that is highly controlled by the State, did not depreciate despite the pandemic," Mera points out. .
Furthermore, "the price of ocean freight from Vietnam almost tripled," he adds.
Consumption and prospects
Symbol of activity and encounter, the cafe also had to be confined by the coronavirus. Consumption jumped from shops to homes.
And although the restrictions affected movement in ports and collectors, consumption suffered less than expected (-2.4%), although for the third consecutive year it was below production.
According to the ICO, the world collected 168.68 million bags in the 2019/2020 period, while consumption was 164.53 million.
While demand is expected to recover, a 1.9% increase in world production will cause a surplus of 5.27 million bags in 2020/2021, the entity added.
The consumption of the hot drink tends to increase during the winter. But coffee shop closures and restrictions in virus-hit European countries may alter the trend.
In 2021 Brazil could mark the fortunes of the market. Experts predict a drop in its arabica production of close to 30% due to a severe drought, which could potentially benefit countries such as Colombia, Ethiopia or Central America.
"But Brazil continues to expand, beyond this bankruptcy that it is going to have in 2021," says Mera.
Source: Diario Gestión (Peru)