By Marvin G. Perez
Arabica coffee facing two factors not seen before: stockpiling and social distancing, Rabobank analysts including Carlos Mera say in report.
“Stockpiling is very bullish through 1H 2020, whereas social distancing is expected to significantly reduce out-of-home consumption”
“Most coffee shops in China have now reopened, but foot traffic is significantly lower” and “the same pattern can be expected almost everywhere”
In mature markets, consumers will have the ability to replace out-of-home with at-home consumption.
On the one hand, not all cups that would have been consumed out-of-home will be consumed at home; yet, the extraction method at home is usually less efficient
“The net effect is anyone’s guess”
In short term, demand may look better than expected in the coming two months due to an increase in working and kitchen stocks.
Given expected drop in GDP and growing unemployment, “we would tend to believe that the underlying rate of growth in demand will probably be low to slightly negative, in terms of what was seen in 2009”
We should emphasize that overall coffee demand is pretty recession-proof”
Agricultural commodities markets have swung wildly amidst concerns for demand destruction and supply chain stability and that’s expected to persist with markets weighing the oil price war, supply-disruption potential and weather for upcoming crops, bank says
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