The International Coffee Organization (ICO) has published the second issue of its Coffee Break Series economic publication, named ‘Volatile Coffee Prices: COVID-19 and Market Fundamentals’.
The COVID-19 pandemic is a health crisis with significant impacts on economies worldwide. The ICO said that this issue of the Coffee Break Series focuses on supply and demand-side effects on coffee price volatility.
According to ICO, since the COVID-19 outbreak was declared a global pandemic, the virus has spread to all coffee importing and exporting countries. While the virus is likely to affect all stages of the coffee value chain to a greater or lesser extent, the specific impacts on regional, local, and international markets will be noticed at different times.
As stated by ICO, overall effects will depend on the relation between supply and demand factors, how market actors anticipate and respond to these, and also the capacity of individual countries to detect and contain the virus while moving into the harvest season.
With worldwide negative growth forecasts for 2020, an impending global recession could impact overall coffee consumption. But, the ICO stated that demand for food items like coffee tends to be relatively inflexible. Besides supply and demand factors, the ICO said non-fundamental factors such as speculation could also potentially provoke coffee price volatility. Sudden movements in coffee prices during the pandemic may attract speculators – non-commercial traders. However, ICO also said that this effect is short-term and has occurred both in periods of falling and rising coffee prices.