(Bloomberg) -- Goldman Sachs updates three-month coffee forecast to $1.12/lb, while six-month outlook is $1.20/lb and 12-month estimate at $1.35/lb, on recovery in demand and risk to Brazil crops from La Nina’s dryness, analysts led by Jeffrey Currie say in report.
Pices may appreciate from second half 2021 given an expected V- shaped recovery in demand, at about 1.1% y/y for 2021, after a 0.9% fall in 2020
Near-term, analysts expect demand weakness as European lockdowns bite and the risk of further restrictions in the U.S.
“While bearish, delays in getting the record Brazilian crop to market have left on-exchange stocks falling and provided support to prices”
EU and U.S. – core consumers of high-grade Arabica – are seeing imports rise with next year’s Brazil’s “off year” in coffee production
La Nina’s induced drier weather in South central Brazil is causing flowers to wilt across Minas Gerais, a leading indicator for falling yields, presenting “material upside risks” to 3-month, 6-month forecasts
There’s potential for further upside in long run given building supply threats due to Covid as worker-intensive harvesting processes have been stymied by lockdowns, allowing coffee borer to attack plants
Coffee-rust disease is further damaging harvests in Central America
Global sugar prices will decline moderately in 1H ’21, stabilizing at a new equilibrium of 13.5c-14c/lb as supply gains offset a moderate demand recovery
Global production seen up 9% to 180m mt despite falling Thai yields, with the market underpricing India’s large crop and rising stockpiles
Large Indian sugar-export subsidy and low domestic prices will drive exports to 6m mt, which will be only partially absorbed by recovering demand, and oil prices
After falling for first time in 40 years, global demand will rise about 1.5m mt as lockdowns are lifted, albeit at a slower pace than pre-Covid​​​​​​
Rising ethanol prices during Brazil’s crushing season should moderate India’s supply glut in 2H 2021
On cotton, bank sees demand in 20-21 rebounding 12% and production falling 5%, pushing world into a deficit
Firm forecast prices at 73c/lb for 3mo, 74c/lb for 6mo and 75c/lb for 12-months
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