Cepea, July 16, 2020 – The Brazilian 2019-20 coffee season officially ended in June, and the prices for arabica coffee were higher than in the 18-19 crop. On the average of the season (July/19 to June/20), the CEPEA/ESALQ Index delivered to São Paulo (SP) closed at 504.90 BRL/bag, 51.43 Reais per bag (+11.3%) up compared to that in the previous season, in real terms (values were deflated by the IGP-DI from May/20).
The upward trend of arabica prices started in late 2019, influenced by concerns about the supply of higher quality coffee – due to the lower production in a negative biennial cycle and rains during the harvesting. Besides, the decrease in the world coffee inventories also pushed up prices in that period. Thus, between late Nov/19 and early Jan/20, arabica prices were higher than 500 BRL per bag.
However, in mid-January/20, quotes were pressed down by expectations for a large harvest in the 2020/21 season. Between March and early May, prices started to rise, due to the covid-19 pandemic and the sharp dollar appreciation against Real. In this case, the global instability made agents concerned about a possible lack of coffee, due to logistic issues in coffee-producing countries and the sudden increase in demand (at the beginning of the quarantine period, the demand for stocking coffee increased sharply in several locations).
From March to May, the Index for arabica coffee remained higher than 550 BRL/bag, and the dollar, higher than 5.00 BRL. On the average of the 2019/20 season, the American currency closed at 4.49 BRL, a staggering 16.1% up compared to that in 18-19. In June, however, arabica prices dropped in the Brazilian market, due to the harvesting of the 2020/21 crop in Brazil.
For the next Brazilian season (2020/21), agents from the sector expect prices to be lower than in the 19-20 season, due to the positive biennial cycle and the possible record output – of 67.9 million bags, according to estimates from the USDA released in May.
Moreover, quotes should still be influenced by the probable lower demand. Although home consumption increased during the covid-19 pandemic, closure of coffee shops and restaurants should hamper coffee trades, since the demand from these places accounts for 25% of all the volume marketed, according to Euromonitor.
On the other hand, agents consulted by Cepea indicate that around 30% of the 2020-21 crop has already been traded – in some regions, this percentage is higher than the national average – and prices range from 490 BRL to 600 BRL/bag, depending on the period and the coffee quality.
ROBUSTA – Differently from arabica coffee, robusta prices dropped slightly in the 2019-20 crop. On the average of the season (July/19 and June/20), the CEPEA/ESALQ Index for the robusta type 6, screen 13, Espírito Santo State, closed at 319.54 BRL/bag, 5.5% lower than in 2018/19, in real terms.
Early in the season, domestic prices were pressed down by high supply in both Brazil and Vietnam (the top robusta-producing country in the world), and the Index remained lower than 300 BRL/bag until October. Thus, although prices increased in late 2019 and in 2020, boosted by the dollar and higher demand in the first months of the covid-19 pandemic, the average of the crop decreased to levels similar to that in 2018/29. From mid-May, prices resumed dropping in Brazil, due to the advance of the 20-21 crop.
For the 2020/21 season, agents expect prices to be similar to that in 2019/20, based on the demand, which may continue firm, from both the industry and exporters.
It is worth to mention that robusta exports have already increased in the 2019/20 season (primarily in the last months) and may increase even more in 2020/21, mainly because of the population’s lower purchase power (because of the covid-19 pandemic), when consumption of common coffee (which use robusta blends) tends to be higher.
BRAZILIAN MARKEET IN JULY – Prices for arabica and robusta coffee dropped in the first fortnight of July in the Brazilian market, due to international devaluations for the variety. The CEPEA/ESALQ Index delivered to São Paulo (SP) closed at 485.62 BRL/bag (90.23 USD/bag) on July 15, 4.3% down compared to that on June 30.
As regards robusta, quotes dropped slightly in the fortnight, by X%, since the lack of sellers in the Brazilian market underpinned quotes. Between June 30 and July 15, the CEPEA/ESALQ Index for the robusta type 6, screen 13, Espírito Santo State, decreased by 1.2%, closing at 348.10 BRL/bag (64.68 USD/bag) on July 15.