Coffee Traders Forum
[ Post a Response | Coffee Traders Forum ]
Global Coffee Balance Sheet Scenarios
Posted by Q
on July 23, 2021, 9:43 am
Two scenarios below. Both assume the loss of 4.5 MM bags of arabica next year due to this year's drought/frosts. I have 51.5 MM bags of arabica in Brazil next year as trend, so 47 is the assumption. The difference is demand. The first balance sheet is USDA's demand for this year. USDA assumed basically unchanged demand YoY. For the sake of simplicity I am assuming 22/23 returns to trend. The second balance sheet is my personal view on what will ultimately be closest to correct. Demand accelerates to trend this year in the wake of covid reopenings, and then is unchanged next year with high prices. My work on demand suggests we don't kill coffee demand until price relative to disposable income is north of 250. Regardless, in the former scenario, my view on price is there is no reason to trade sustainably north of 200 and that a 160-200 range is fair until we sort out demand longer term. In the latter scenario, I think price is well valued at 220 and that price should range 190-250. Fwiw.