Coffee prices on Tuesday calmed a bit in the market although it saw robusta at a 2-1/2 year high with July ICE Robusta coffee closed up +8 (+0.51%). The prices remain high on concerns over Brazil’s harvest. Rainfall in the main coffee-growing region, Minas Gerais, was 6.7 mm last week, which equates to a meagre 38% of the normal average.
However, July arabica coffee on Tuesday closed down -1.30 (-0.80%) after the futures price retreated from a new 4-1/2 year high on Tuesday in response to a statement from the president of Colombia coffee grower group Fedecafe, who reported around 500 trucks of beans had made it to the port at Buenaventura. As we previously reported the country was struggling with logistics after widespread protests left roads and ports blocked.
The protests, over tax reforms, have been ongoing since late April and were impacting coffee exports to such a degree that traders were having to offer clients alternatives.
But the biggest issue remains the ongoing drought in Brazil which looks set to continue to impact harvests, with some predictions of a 23% drop in overall production, which would see the country back at production levels not seen for over 4 years, with circa 48.8 mln bags.
Last month, the International Coffee Organization (ICO) cut its 2020/21 global coffee production estimate to 169.6 mln bags down from an earlier estimate of 171.9 mln bags, which comes at a time when the vaccination programmes in many countries are accelerating, leading to hope that cafes will soon reopen, igniting demand from the sector.
Coffee prices have support from the outlook for increased demand as a faster pace of Covid vaccinations allows more restaurants and coffee shops to reopen throughout the world.
Vietnam, the largest producer of Robusta coffee, reported a fall in exports YoY from Jan to May by 11.4% to 720,000 Tonnes, which helps explain why robusta prices are staying buoyant.