By: Virgínia Alves
Rabobank: In one year, coffee advanced 17% on the stock exchange and the scenario is still of uncertainty in demand
Posted on 22/03/2021
Restricted supply from Brazil and depreciation of the real gave great support to prices
According to data released by Rabobank, coffee prices advanced 17% on the New York Stock Exchange in the last year. The figures were released on Monday (22), in an analysis made one year after the beginning of the pandemic. In comparison with other agricultural commodities, coffee grew less intensely, as Rabobank's figures show a 45.1% increase during the period for other commodities.
"Even so, looking at the local market, the depreciation of the Brazilian real contributed to the coffee prices reaching record levels in March 2021, an average of R $ 740 / bag (60 kilos), 33% higher compared to 12 months" , says Rabobank.
The report also states that the main factor for appreciating the market is precisely Brazil's restrictive supply in the 21 coffee harvest. In addition to the biennial, the main producing region in the country faced an intense water deficit and high temperatures during the flowering period, directly impacting the crop's productivity.
Rabobank estimates the current cycle at 56.2 million bags, 36 million of which are Arabica. This represents a decrease of 26.5% in relation to 2020/21, for arabica. Depending on the development of the grains, further reductions are not ruled out. At the same time, there is great concern about the quality of the harvest due to the irregular rainfall during the cycle.
Regarding the Brazilian harvest, the analysis highlights that the latest rains favored grain filling, as well as the recovery of crops for the 2022/23 cycle. "The weather will be an important factor in the coming weeks for the current harvest and the potential of the next," he says.
In addition to a scenario of reduced supply, Rabonk points out that uncertainties in relation to the market remain on the market's radar. According to the publication, even with a promising scenario, with the expansion of vaccinations, the current restrictions in the most diverse consumer regions should limit the demand for coffee in the first half of 2021.
"Additionally, Brazil has large stocks of coffee from its last harvest to supply the market, remembering its recent exports and the increase of its share in ICE-NY stocks. These fundamentals should still limit quotations in the short term. In this context of volatility, increased participation of non-commercial funds and uncertainties in demand, Rabobank projects coffee prices in New York above USD 1.15 / lp (USD 1.25-1.40 / lp) ", he concludes.
Regarding the countries competing in production, the bank pointed out that in the current cycle, Honduras and Vietnam have been showing sharp drops in exports compared to 2019/20. "In 2020/21, harvests in Vietnam and Honduras are estimated at 28.8 and 6.2 million bags, respectively. On the other hand, the Colombian harvest seems to be progressing well, and for the 2020/21 season 14 are expected, 1 million bags ", he adds.
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