Coffee is performing as one of the world’s top commodity

Uncertainty over inventories, labor force and long term demand drove coffee prices higher.

The Coronavirus pandemic caused a rush for coffee beans last month. Roasters worked to the full to meet demand from consumers. Meanwhile, shutdowns disrupted supply.

José Marcos Magalhães, head of Minasul, Brazil’s Cooperative of Coffee Growers, noted that the company has very high demand, mainly from Europe. The consumption of coffee has increased a lot in supermarkets in the US, and they are renewing stocks. The cooperative was expecting a shipment of 400,000 bags for the whole year. However, coffee orders passed that level in March. Magalhães anticipates the sales to top 800,000 bags. It is more than double compared to last year.

At the beginning of the Coronavirus crisis, as cafes in China closed, coffee prices rebounded as big coffee roasters such as Nestle, JAB, and Lavazza rushed to secure beans. 

Since the beginning of February, the futures benchmark for the higher quality arabica bean traded 20% higher. 

Despite demand, there is still an uncertainty in coffee consumption

In 2018 and 2019, low prices in coffee caused many growers to abandon their farms. Because of lower yields, exports from countries like Honduras and Colombia dropped. 

At the ICE exchange, Certified arabica stocks have fallen 11 percent to a two-year low. Colombian Coffee Growers Federation noted that there is a shortage of washed Arabica. Analysts anticipate that the pace of exports will be slow. Magalhães states that the stock is low, and the company is unable to fulfill all requests. Producers hope Brazil’s harvest in May, and Colombia’s second harvest to be near record highs. 

The shortage of labor migration is expected. Carlos Mera, an analyst at Rabobank, says that the future of the harvest is still largely in question. The peak of the pandemic is likely to hit Colombia in late April or early May. Travel restrictions the government has imposed pose a challenge to coffee picking. 

There is an uncertainty in the commodity consumption too. The demand for it climbed up in March. The US sales jumped up as much as 73% from 2019. Still, due to the closedowns, consumption chains such as Starbucks have stopped operating, which affects the overall demand.

Stephen Hurst, head of Mercanta, specialized in supplying high-grade coffee to coffee shops and artisanal roasters, said he had seen the Asian business rebound. Magalhães hopes that demand will keep the prices at current levels. He said that roads and ports have remained open. Besides, the company’s growers are in a natural quarantine, since they live on the farm. Such isolation allows coffee agriculture to continue running.