+44 (0)20 7202 2620

Coffee Market Report March 2020

Concerns regarding COVID-19 have continued to knock down markets, raising fears about a global economic slowdown. Governments across the world have responded with (semi) lock downs on the one hand and with stimulus and compensation packages on the other.

This may sound good in theory, but in practice there appears to be a disconnect between government rhetoric and what is happening on the ground. In the UK the mechanism for distributing government backed financial support for grants and furloughing is not yet in place. Banks are under fire as some are refusing funds to good businesses under the government-backed loan scheme. This is stoking anger as many business owners feel the banks should simply be told to return the favour that the tax-payers gave them when they bailed them out back in 2008.

Next to an analysis of global impacts on the supply and demand of coffee, this month our country focus will be on Peru, Ethiopia and Mexico.

Coronavirus Updates

The European Central Bank (ECB) has announced a €750 billion emergency package to ease the impact.

The Bank of England made interest rate cuts from 0.75% to 0.25% and then further down to 0.1% (its lowest ever). It is also pumping another GBP200 billion of cash into the economy, buying UK bonds under the QE money printing program.

In the Eurozone, the Netherlands and Germany strongly oppose calls from France, Italy and Spain for issuing a joint debt instrument to fight the economic fallout from the pandemic.

There is a significant shift from out-of-home to in-home consumption. This is likely to involve a change to lower quality blend compositions.

Supply disruptions and logistical hold-ups in origin countries are delaying shipments to port as well as milling (and picking) operations. Although quarantines are extended to mid-April and beyond, this does not mean ports are completely closed off. We still see coffee being shipped out, be it at a slower pace. Some concerns are raised about shortage of containers mostly due to a drop in cargo shipped from China to south American ports during Feb/March. This route is now slowly starting up again though.

The world’s biggest roasters are looking to bring forward orders as a hedge against coronavirus-related port disruptions. Nestle SA, Jacobs Douwe Egberts and Keurig Dr Pepper Inc. are among buyers requesting to have beans they contracted for June and July be shipped in April.

There are very few immediate availabilities of washed Arabica. Specifically, washed milds are in high demand for spot in Europe. Bigger trade houses are trying to fill up gaps caused, especially the ones carrying sustainable certification.

ICE Exchange can no longer ensure the sampling and grading of certified stocks to be completed in time for the expiration of May coffee futures contracts.

MSC/Maersk have extended their blank sailing program after Chinese New Year, first because of the Corona crisis in China and now in Europe & India. In reality this means that out of their many weekly sailings they have cancelled a few, but not all. There was a strike at the state-owned bulk-terminal, but not the container terminal.

As we are waiting on new season coffees to flow in from most central/south american regions, this time of the year stocks in origin are usually low.  Next to that, a lot of volume was already sold on forward contracts back in December, when farmers/exporters wanted to profit from a high NY C market. Adding the logistical backlog; the “in-between-crop’ situation is likely to become a tight one.

Panic buying among consumers across Europe has also hit the supermarket coffee shelves. As we have seen a major consolidation over the past years, only few (industrial) roasters seem to really profit. Respective buyers are still looking to cover for this increase in demand. At the moment this is resulting in temporary shortages and big upward pressure on prices.

In the meantime, Saudi Arabia and Russia are still in a price war that has driven the crude oil market to its lowest levels in two decades (60% plunge this year). China is profiting and filling up its strategic oil reserves. Trump called for a trade deal with all opec+ members to cut production.

NYC Market

We know that coffee generally sits in the riskier commodity baskets due to its volatile behaviour. But during March we have seen an even higher amount of big intra-day spreads than usual; up to 7 cents as can be seen from the above. After a strong month in February, March initially started off well. The first few days NYC seemed to isolate itself from risky asset liquidation. It managed to stay above the USc110 c/lb level, even with a Brazilian real trading as low as R$ 4.50 to the dollar.

On the 18th March it then started to move up amid a supply deficit against May-20. Also, the European ‘commercial sector’ started drawing on the Arabica certified stocks as protection against current events.

Long spec liquidations than initiated a free fall with a lot of selling of the May-July switch.


Uganda and Indonesia keep up Robusta availability, holding record high differentials.

While New York Arabica futures rose by 8.8% to an average of 116.09 US c/lb in March 2020, the London Robusta futures market in March declined by 2.8% on average to 57.39 US c/lb.


In March the Pound Sterling initially remained firm, even hitting the magic GBP/USD level of 1.30! It then ended up in a tug of war of Coronavirus led economic policies and interest rate cuts between the UK and USA. Eventually the Pound plummeted after 12th March when financial markets suffered a panic induced meltdown to reach a cable level of 1.15 on 19th March.

Uncertainty hit a peak and there was genuine concern the UK would not be able to contain the outbreak as cases were escalating by the day. Despite fragile global risk appetite, it eventually slid up reaching a level of 1.23.

After GBP/Euro touched a low of 1.05, investors continued to buy Sterling (GBP) versus its weaker rivals and ended the month at GBP/€ 1.12

The USD saw all-time highs against the BRL (@ 5.0680) and the COP (@ 4,167.95).

Big origins: Brazil, Colombia & Vietnam

In Brazil, the expected peak of the coronavirus pandemic is expected to coincide with Brazil’s coffee harvest preparations starting in May/June. There’s an increased demand for nearby shipments. Current crop quoted 4 to 5 cents above new crop.

The weakened Brazilian real against the dollar is offering local producers and exporters more ‘bang for their buck’. March registered 3.36m bags of shipments, the highest March total on record (although on the back of very low February numbers). We expect to see similar high numbers in April.

Colombia’s Mitaca crop typically begins harvesting in April. There’s a lack of picker availability from neighbouring countries and some mills are operating at only one third of their usual capacity (8 hour shifts instead of 24 hour shifts). Rainfall in the southern regions has fallen well below the seasonal average; not ideal for cherry growth of the Mitaca, and not ideal for main crop flowering.

Vietnam is in the dry season now, which started about a month earlier than normal. The central highlands are likely to face droughts from April to mid-May. Social distancing measures are unlikely to have a large impact on production, which is estimated 4.4% higher than last season at 31.2 million bags. Harvest is mostly complete.

Focus on


Ethiopia has one of the fastest growing economies in the world (+/- 10% per year over the past decade). The capital Addis Adaba has seen a construction boom and rapidly changing skyline, now also nicknamed ‘the Dubai of Africa’.

A resolution to the Nile conflict with Egypt has been pushed further away. Ethiopia refused to send representatives to the final round of negotiations over the use of Nile water.

Internally the government’s support for business investment is starting to show results. The chronic shortage of forex remains, although no major devaluation so far this year due to good inflow of cash from abroad.

Although the coffee export season should be in full swing, trade has decreased as businesses, schools and government offices are closed. Stringent measures are implemented and the ECX is only partially operating. Some producers are dumping their coffee at the ECX instead of exporting themselves to get immediate payment before the situation gets worse.

In the south, Yirgacheffe, Sidamo and Guji are all expected to yield lower crops (30%, 40% and 15% lower respectively). A brief panic short covering took place skyrocketing the price of cherry.

In the West (Limu and Djimma) coffee is usually a bit later because the majority is dried at the farm. Already European industry was able to contract sizable volumes of Djimmah-5.

More bureaucracy is on the way as government is trying to put a new system in place to limit people selling at losses just to get forex in. Prices are supposed to be based on the average of the previous trading day. No one is really confident of how this should work in practice.


Many producers expected a bigger crop number than last season. However, latest figures point to a similar volume as last year, save in the central region, which looks to be bigger than last year by 15-20%. So far 8% is harvested of which little (about 1%) is sold.

In the north, the lower altitude regions recently began harvesting and although dry; climate has been very favourable and for now coffee quality looks promising. For other food crops (that need more rain) conditions have not been so favourable. Farmers living off other products next to coffee might therefore see limited income from their overall yields.

For coffee quality, from May onwards it is hoped the dry spell will continue so that there are no issues with dying parchment.

Although the coffee business, because of where we are at in the year, is not severely impacted by COVID19, a lot of restrictions have been put in place. Social isolation is mandatory, and people can only leave the house for necessities until 6pm. Interesting fact is that men only can leave Monday, Wednesday, Friday and woman only on Tuesday, Thursday, Saturday. Sunday no one is allowed outside.

Some Cooperatives remain closed for business with limited means of communication, but overall coffee operations are still allowed to continue with precautions in place. Internal logistics is slow though and available labour is little. It remains difficult for cooperatives to continue gathering harvest capital “acopio” ahead of harvest opening.

In mid-March we saw a very weak US Dollar at $/Sol 3.53 which later on strengthened to $/Sol 3.37 as the overall sentiment is that Corona risk is getting less.


Coffee is produced in 15 Mexican states; Chiapas leads with 40% of production, followed by Veracruz at 25%, and Puebla has 16%. Most of it is Arabica, and around 35% is considered high quality (900 meters above sea level or more).

Although Mexico is not on the specialty radar of many, it is only a matter of time until it will be. Having now recovered from a period of leaf rust, it is getting back to its pre-slump 4.5 million bags. It has speciality coffee varieties (including Bourbon, Caturra, Typica), it is close to the USA which has a large specialty market, there is a big small holder / cooperative culture, and there is a massive amount of high-altitude fertile coffee land available. All this together with increasing government support should allow it to grow in both directions. By some it is even called ‘the sleeping giant’.

The government is supporting coffee producers via the ‘Sustainability and Welfare for Small Coffee Producers’ program (SUBICAFE), which includes technical assistance packages that provide nutritional inputs, fungicides, and tools for work in plantations as well as providing leaf rust resistant plants like Oro Azteca, Costa Rica 95 and Sarchimor. The objective of the program is to increase productivity to 10 million 60/ Kg bags from 2019 to 2024.

Nestlé is building a new $154 million plant that will process 20,000 MT of green beans. The plant will create jobs and provide necessary coffee supply for the increasing local consumption. However, small scale family- owned coffee producers fear it will bring down prices and force them to grow lower grade Robusta coffee instead of the Arabica they currently grow.

Exports have declined by 13%, partially in response to low prices, but also due to rising domestic consumption. At the same time neighbouring countries recorded increases in exports. At the moment only small amounts of washed coffees can be found in the lower regions. Natural processed coffees are more widely available, for which there’s a better than usual demand. This has to do with Guatemala having a much lower production and both Nicaragua and Honduras being basically sold out.