After crossing low levels, coffee prices rise at the end of 2019

After spending much of 2019 at low levels, the prices of Arabica and Robusta coffees rose strongly in the last months of the year, as indicated by data from Cepea (Center for Advanced Studies in Applied Economics), from Esalq/USP. Until October, values ​​were weakened, influenced by initial supply prospects that were still comfortable in the 2019/20 harvest year. In general, agents remained away from the market for much of this period, trading only when prices reacted, a scenario seen especially in June and September.

In November, according to Cepea surveys, prices started to register a significant recovery, especially those of arabica. This scenario, in turn, was linked to the lower supply of fine coffees, concerns about the availability of the beans in 2020, technical gains in the futures of both varieties, greater demand and the higher dollar. 

Arabica

Given the initial prospects of comfortable supply, arabica prices fell in the first half of the year, with the CEPEA/ESALQ Indicator for arabica type 6 hard drink operating below R$400/60 kg bag in some months. It is worth pointing out that this situation meant that the average for the 2018/19 harvest (from July/18 to June/19), of R$430,56/bag, was the lowest since the 2001/02 season, in real terms ( prices were deflated by the IGP-DI of November/19). 

At the end of this year, the arabica indicator returned to close between R$500 and R$570/sc of 60 kg, approaching the real values ​​observed at the beginning of 2017. In the partial of the 2019/20 harvest (July/19 to December/19), the average Arabica indicator was R$454,70/bag, an increase of 1,4% compared to the same period of the 2018/19 season, in real terms.

According to Cepea researchers, the recovery in prices reflected the low supply of fine coffees from the 2019/20 harvest, due to the rain and the risk of frost in June and July. Subsequently, with the development of the 2020/21 harvest, new concerns about the climate emerged. The high temperatures and low rainfall resulted in the fall of some flowers and, later, of pellets and weakened the coffee plantations. Although the return of rains in November allowed a good recovery in arabica crops, new concerns about supply in the short term boosted prices.

In addition to Brazil, there was a reduction in the supply of good to fine coffees in origins such as Colombia and Central America this season, due to climate issues and less treatment on crops, as a result of low commodity prices. The more restricted supply of these coffees even led to a drop in stocks on the New York Stock Exchange (ICE Futures) at the end of the year, contributing to the strong increase in external prices.

The strong reaction in prices in November increased the pace of coffee sales, both physically (2019/20 season) and for future delivery (2020/21 and 2021/22 harvests). This scenario, in turn, made agents aware of the availability of coffees in 2020 and reinforced the upward movement.

Robust physique

In addition to the record production in Brazil in 2019/20, the harvest of a still voluminous 2019/20 crop in Vietnam (30,5 million bags, according to the USDA), the world's largest producer of Robusta, also put pressure on grain prices. This scenario led to a strong devaluation of Robusta throughout the year, with prices for type 6 operating between R$280 and R$290/60 kg bag in many months.

Thus, the average of the CEPEA/ESALQ Indicator for Robusta type 6 sieve 13 above, to be withdrawn in Espírito Santo was R$ 295,90/sc in the partial harvest (from July/19 to December/19), a low of 13,4. XNUMX% compared to the same period of the previous season, in real terms.

Although less expressive than that of arabica, the prices of the variety also recovered throughout the second half of the year, with the indicator returning to close above R$ 300/sc from November onwards.

Coffee exports

Despite lower production in 2019/20, shipments recorded a good performance, with volumes close to those of the 2018/19 season, which was a record. According to Cecafé (Coffee Exporters Council), in the partial part of this harvest (from July/19 to December/19), total shipments (considering green, ground roasted and soluble beans) amount to 17 million bags and coffee green (arabica and Robusta), 15,3 million, practically stable (+0,2 and +0,04%, respectively) compared to the same period in the previous season (2018/19).