Coffee prices set to rise in short term amid supply chain disruptions

Demand continues to remain high, as harvesting and shipping issues hamper supplies

While the plantation sector anticipates huge losses due to Covid-19, coffee priaces have been on the rise due to high demand and low supply, in a trend that is likely to continue.

According to a market report by the Coffee Board of India, as on April 24, future prices based on the Intercontinental Exchange (ICE), New York, are expected to go up from Rs 188.05 per kg in May, to about Rs 191.86 in September. 

The London International Financial Futures and Options Exchange (LIFFE) price for Robusta is expected to go up from Rs 85.49 per kg in May to Rs 89.94 per kg in September.

According to International Coffee Organisation (ICO), the Group indicator price as on April 22 was at Rs 262.54 (as against the previous price of Rs 261.50) per kilogram. The Robusta price was Rs 102.92 (Rs 104.40) per kg.

World coffee consumption is estimated at 169.34 million bags in 2019/20, or 0.7 per cent higher than in 2018/19, as Covid-19 presents considerable downside risk to global coffee consumption. Currently demand is estimated to exceed production, estimated at 168.86 million bags, by 0.47 million bags in 2019/20. However, the situation is evolving quickly impacting both supply and demand.

However, coffee consumption may also contract as a result of the containment measures against the spread of coronavirus, particularly for out-of-home consumption. Additionally, global economic growth is expected to be much lower than initial forecasts, accompanied by rising unemployment rates, further reducing demand and putting downward pressure on prices. On the other hand, disruptions to the supply chain both in shipping and harvesting could lead to temporary shortages in the supply, putting upward pressure on prices in the short term.

According to ICO, prices for all Arabica group indicators rose in March due to concerns over the availability of that variant, while Robusta prices fell by 0.9 per cent to 67.46 cents a pound.