Possible low supply in 2020 may keep prices firm

Cepea, January 15, 2020 – The next Brazilian season (2020/21) is likely to have a big volume, according to players surveyed by Cepea, at slightly more than 60 million bags. Still, production may be lower than the record obtained in the 2018/19 crop (62 million bags). This scenario and the high volume of coffee beans traded in late 2019 may sustain quotes in the first months of 2020.

 

PRODUCTION – Unfavorable weather conditions up to mid-October 2019 might explain the possible lower production. In that period, high temperatures and the low amount of rains resulted in losses of flowers and fruitlets, both in arabica and robusta crops. Moreover, low prices in most part of 2019 led many producers to reduce cultural practices in 2019/20 and the 2020/21 blossoming, which may limit productivity.

 

On the other hand, rains in November and the sharp price recovery in late 2019 have encouraged coffee growers, who resumed investments in the end of the year – this scenario may favor the productive potential in 2020/21. The robusta harvesting is forecast to start in April and, for arabica, in May.

 

PRICES – Expectations of small production in the upcoming season and low ending stocks in 2019/20, in turn, are likely to result in higher quotes to producers, at least in early 2020.

 

However, it is important to mention that higher prices in late 2019 have increased trades involving arabica coffee from the 2019/20, 2020/2021 and 2021/2022 crops. As a result, some agents are concerned about the volume of product available to trade in the upcoming months.

 

As for robusta, the 2019/20 record production and expectations of a good volume in 2020/21 may bring difficulties for price rises in the upcoming months. Vietnam is likely to harvest a record crop in 2019/20, at 32.2 million bags, according to a report from the USDA released in December/19, which may also limit possible price increases in Brazil.

 

However, the demand for robusta may continue high, and producers can obtain good values in 2020.

 

(Cepea-Brazil)

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