Coronavirus Influences the Future of Arabica Coffee
Starbucks decided to close more than two thousand store locations in China, and McDonald’s has closed several hundred stores in China. They have a significant influence on coffee demand.
We have seen a lot of uncertainty in the world markets because of the spread of the coronavirus. Coffee Market declines have been higher than 24% since last month. It should be noted that imports of coffee beans have increased in recent years by China. The Asian giant has grown into a significant player in the coffee market. Coffee has become a cultural icon in the country. Coffee imports by the country have tripled in the last decade. China has representation from many large multinational chains.
The coffee industry in China has been suffering the consequences of the economic shutdown in China. One of the essential coffee chains, Starbucks, reported the closure of more than 4000 stores in China, causing a stock market drop of more than 5%.
Brazil Harms Coffee Prices
Colombia is the first Arabica coffee producing country, competing with another emerging county such as Brazil. Also, according to the latest news in Brazil, the country estimates an increase in Arabica coffee production between 25 and 35% compared to 2019. Meteorological Consultant Rural Clima said last Thursday that Brazil’s coffee crops face exceptional conditions for development. Brazil coffee exporter Coexim last Tuesday projected that Brazil’s 2020/21 coffee crop would climb +19.2% y/y to a record 67.7 mln bags, above forecasts of 62 mln bags from Conab, Brazil government’s forecasting agency. Also, ICE-monitored arabica coffee inventories on Thursday climbed to a 2-1/4 month high of 2.179 mln bags, recovering from the mid-Dec 1-1/2-year low of 2.022 million bags. The information put Arabica coffee under pressure too.
Coffee prices dropped back Wednesday with Robusta coffee at a new 3-1/4 month low. Moreover, coffee prices have moved lower over the past six weeks on grown supplies and demand concerns.
Coffee prices had a negative surplus from Tuesday when Marex projected the global 2020/21 coffee market to swing to an excess of +500,000 bags from a revised -3.2 mln bag deficit in 2019/20 (previously -4.7 mln bags).
The International Coffee Organization (ICO) notes in the January 2020 Coffee Market Report, that coffee prices dropped again in January following a two-month rise. Since the 10th of January, the coffee prices have fallen by under 18%.
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