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December Market Report: Summing up 2020

Welcome to DRWakefield’s December Market Report.

At the end of the year we like to sum up what has happened over the course of the last 12 months, and I am sure we don’t need to tell you what a year it has been. Of course this year the news pie has had a Brexit base, been filled to the brim with Coronavirus and lightly topped off with the occasional political protest or extreme weather event. Not to the mention the side serving of buffoonery courtesy of none other than Trump. Throughout all of this, the coffee industry has remained somewhat intact with countries of origin going to remarkable efforts to keep up the flow of those little green beans and people on the other end continuing to indulge in that daily drinking habit, not to mention everyone who played their part in between.

NYC Market

Source: Refinitiv

January saw the market drop considerably, opening just shy of 130 c/Ib and close just above that all significant level of 100 c/Ib. It lost a value of 26.9 c/Ib over the course, some 20.8%. Good rain in Brazil helped maintain the downward pressure on the market and this was aided by the depreciation of the Brazilian Real against the US Dollar, which hit a record low. Other markets such Crude Oil, also experienced a similar drop during this time frame. February managed to scrape back some of the lost value but it wasn’t until March where more comfortable levels were granted. After a particularly turbulent month with some days experiencing spreads of up to 7 cents, it closed out at 119.55 c/Ib. April started trading at 118.60 c/lb and people were bullish; there were container shortages across Central America and restrictions on the mobility of agricultural workers in Brazil. However, even though it looked like there could be a shortage of supply, the uncertainty regarding global demand meant that activity was hesitant and apart from a brief surge in May, the market rolled down to its lowest point of the year, 92.70 c/Ib on June 16th. As you can see from the 5 year graph below this is still above the lowest point in 2019 but considerably under the 5 year average overall. The beginning of July remained very static but the latter two weeks saw a jump back up on the back of weakening dollar and predicted cold spells in Brazil. Following another dip in August, the NYC rallied and peaked at 134.80 c/Ib in September, which would turn out to be the year high. Once again from the 5 year graph below you can see that this is also the highest value since 2017 but is still 50 c/Ib short of the high point reached in 2015. The year ended in a strong position at 126 c/Ib: the US dollar had weakened, consuming nations continued to draw down certified stocks and focus shifted to Brazil’s 21/22 harvest ‘off cycle’, and fears surrounding the impact of drought on its potential cop output.

Source: Refinitiv


Robusta demand was expected to increase dramatically as lockdown and closed hospitality venues forced people to move to in-home consumption, but the increase has been marginal. This level of demand is predicted to hold. Both Vietnam and Indonesia have experienced recent drops in production but both are forecast to recover. It was calculated by the ICO that the 2020 demand deficit lay at 3 million bags after the production of 72.8 million bags but that is expected to reduce to 1.25 million bags in 2021 if an increase to 75.2 million bags is realised.


Source: Refinitiv

The cable experienced a slow and bumpy depression over the first couple of months, sliding down from its opening level of 1.325 triggered by the usual Brexit uncertainty. The Pound actually managed to gain on the Euro and peak at its highest value of the year, but dropped back below its opening level of 1.18. March madness ensued (but not the fun basketball kind) and Sterling ended up in a tug of war of Coronavirus led economic policies and interest rate cuts between the UK and USA and the pound fell against the Dollar and Euro to its lowest points of the year. 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. However, during the same month GBP made a recovery against both currencies. The next three months was devoid of any large movements and it wasn’t until July that relationship between the £/$ and £/€ took different patterns. The greenback value fell as Covid-19 weighed heavy on the US economy. In contrast many European countries has started to show signs of a recovery and the Euro held firm. In September proposed changes to the Brexit Withdrawal Agreement signed last year, put forward by the infamous Internal Market Bill, triggered a loss in confidence in £ Sterling. The final quarter of the year and US election results allowed the Pound recover against the Dollar and end in the strongest position on 2020, over 1.36 whereas it wasn’t able to achieve this against the Euro and made some marginal gains but still closed out lower than the open at just above 1.115.

A Year of Coffee

A summary of 2020

  • Covid-19 lockdowns reduced demand just when Brazils’ record 2020 crop was about to peak resulting in a surplus.
  • Brazil has drastically increased its share in certified stocks.
  • Good cup Brazils have taken the place of certified stocks as the cheapest arabica on the market.
  • Hurricanes Eta and Iota are thought to have a marginal impacts, but will cause supply delays and higher percentages of lower grades across Central America.

In January there is generally a rush in Vietnam by farmers to sell some Robusta stock in preparation for TET, the event where they celebrate the lunar new year. This year however, this was not the case and differentials held firm. This played in the favour of another big Robusta producer, India. Our very own Guus Bremer led an origin trip to India in January to see the development of the harvest. Usually at this time warehouses tend to be full to the brim with coffee ready to be exported, but this was not the case. Floods in 2019 had caused a significant loss of cherries and a delay to picking. Coupled with rising in-country labour costs and the attrition of trees by stem borer over the years, the quantity was down. Although on the plus side quality remained consistent with the previous year.

A report at the end of January from COMEXIM announced that the revised production figure for the 2019/20 Brazil crop was lower than the original estimate of 58 million bags, down to 56.8 million bags.

Unknown to the attendees at the time, Honduras would prove to be the last DRW origin trip of 2020. The harvest was winding up in February and closed off an atypical period – full of rumours, uncertainties, and high domestic prices. It started with speculation that the crop would be very low, resulting in a surge in local pricing as a rush of exporters looked to cover their physical. Some prices would be as high as +35 in relation to standard SHG quality. This, coupled with the New York Coffee price rise at the end of 2019 where the market went over the 130 c/lb, resulted in some producers re-engaging with their farms after some years of increased neglect and the decision to grow other crops.

Concerns regarding COVID-19 continued to knock down markets during March, raising fears about a global economic slowdown and caused disruptions in origin countries, delaying shipments to ports as well as milling and picking operations. Panic buying among consumers across Europe has also hit the supermarket coffee shelves. Peru had begun is harvest with 8% of the crop being collected by the end of March. High Honduran and Colombian prices earlier in the year left a good place for Peru to fill the cheap mild gap. In a bid to increase social isolation the government came up with the novel idea that only men could leave their houses on Mondays, Wednesdays and Fridays and woman only on Tuesdays, Thursdays and Saturdays. No one was allowed outside on Sundays.

The UK and many other countries faced the first full month of lockdown in April. This was a completely new beast to the world, and it was always going to take some time for an equilibrium to be found. Indonesia, a big coffee producing and consuming nation saw consumption plummet amid measures put in by the government to contain the virus. The country faced multiple crises: a health crisis; a financial crisis, and a collapse in commodity prices. There was a drop of 40% in arabica cherry prices since February with the situation being even tougher for Robusta farmers, who make up 73% of Indonesia’s coffee production. There was some positive data however. Indonesia’s shipments in the first six months of the 2019/20 coffee year reached 3.12 million bags, 54.1% higher than in the same period for 2018/19. This went some way to recapture the lost output of the disastrous 2018/19 crop.

Robusta has seen a persistently low-price climate for quite some time now and this has seen many producers pull up their coffee trees and plant other products. As the market has slid over the past few months, differentials in Vietnam have increased to compensate. Many producers held back selling with the hope this might happen; at the beginning of May, there was 7% more stock still in the hands of producers when compared to this time last year. Tight domestic supply of coffee has helped push domestic prices, which has helped producers get a better price with the middlemen and exporters.

Costa Rican harvesting, milling and exports managed to avoid some of the upsets detailed by its neighbouring countries. Figures predicted a 14% increase on last year totalling above 1.96 million fanegas (1 fanega is equal to 46kg of coffee). If you look at a 10-year perspective, 2 million fanegas per crop would be considered a good outcome.

On the 8th of June the NYC saw the start of a sustained downtrend which hit the year low of 92.70 c/lb on 16th June. Weather concerns such as frost forecasts in southern Parana and rains in Minas Gerais supported a steep climb to reach 100.05 c/lb by the end of the month. From the end of June until the end of 2020 the market didn’t drop below that significant marker of 1$/ Ib again.

In El Salvador heavy rainfall hit at the start of June from storms Amanda and Christopher, with some areas receiving over 600% of the average rainfall for this period, causing more than 1000 families to be displaced. However, high levels of rainfall does bode well for next year’s crop. Having tied up the end of the harvest in April, it was estimated that the crop is 15-20% down compared with last year. El Salvador was not as severely affected by the virus as some of its Latin America coffee producing counter parts, such as Honduras which exported 651,746 bags in June, 30% lower than last year.

July saw the easing of lock down restrictions in the UK amongst other countries. Cases of Covid-19 in Brazil continued to rise and it claimed the second highest number of cases in the world, after the USA. On the positive side weather forecasts at the start of July indicated a warmer winter diminishing the chances of frosts, lessening the worries of producers, especially in the regions of North Parana and South Minas Gerais. Dry weather during July enabled a successful harvest and good quality crop. July is typically the slowest month for shipments from Brazil, and the pace of harvest fell behind when compared with the same time on the previous ‘on cycle’ finishing on 78%. However, despite the slow harvest, Brazilian shipments in July reported 0.2 million bags higher than June and 0.4 million higher than July 2019. Colombia had good weather conditions for cherry development and waited patiently for the main crop to arrive in September. Some key industries, like coffee, had exemptions to many of the lockdown rules. Those who work as pickers, truck drivers or in milling plants had the ability to travel freely so the feeling was one of cautious optimism for the upcoming harvest.

In recent years the Rwandan government has been very supportive of their growers, and focus has moved from commodity grade coffees to speciality grades, with investments in planting materials, special processing techniques and helping out cooperatives to establish washing stations and dry mills themselves. There are now over 300 washing stations in this small and very dense country, up from only two in the year 2000! Almost all coffee grown in Rwanda is exported but due to the fact that the small east African country is landlocked, delays caused by Covid-19 between African borders made things difficult throughout August. It took twice as long to take cargo to the port and logistics costs were up 30%.

Perhaps one upside of the current situation is it has forced many changes to antiquated systems that have been in need of an overhaul for some time, in coffee and I am sure many other industries too. In Ethiopia a new online system has been introduced by the Ethiopian National Bank to register contracts and export permits for all 462 exporters rather than doing it on paper. The system does have its problems but it could be a small step towards faster moving documentation. To comply with social distancing measures in Kenya the Nairobi Coffee Exchange took to conducting its weekly coffee auctions remotely, initially using Google Sheets.

September claimed the year NYC high. It hit 134.80 c/Ib on the 4th of September. The year was unfolding differently for all origins and whilst some saw shortages, others like Indonesia held significant volumes left over from April and May harvests. With the next crop just around the corner, and along the supply chain market players holding a large stock position in their warehouses, (some 25% remained unsold) prices dropped quickly. The Indonesian economy slowed down and, in the absence of a government backed scheme to save jobs like the furlough scheme in the UK, unemployment rose dramatically. To add to this, the Indonesian Rupiah weakened against the USD over the preceding months and closed September at 14,900 Rupiah to the Dollar. In contrast to this, round the other side of the Pacific, Nicaragua sold the vast majority and the only coffee still in warehouses was of lower quality coffee that remained in the hands of multinationals. This year’s exports have fared better than they did for the same period in 2019.

October 1st marks the start of the coffee year and is often a time of reflection as producers and exporters alike review how much coffee has been produced and exported compared to previous years. From October 2019 to September 2020, Colombia produced 14.1 million bags, 0.2 million more than the year prior. However, it was not the same story for exports. In the latest coffee year, 12.6 million bags were exported, representing a 6% drop on the previous year where 13.5 million bags were exported. With a weakening peso and increased production figures some wondered if the differentials that rose earlier in the year would come down again, but they remained firm. Colombia held its annual quality competition ‘Colombia, tierra de diversidad’ with a record number of entrants. Antioquia, Narino, North Santander and Tolima took the top spots.

The Honduran, and most of Central American news in November was dominated by the arrival of two Hurricanes; Eta and Iota. Torrential rainfall and high winds caused flooding and mudslides. According to IHCAFE, since the majority of coffee regions are in high altitude areas, away from large rivers and the sea, the nation’s coffee production was only lightly affected. The road network around the country faced a far greater impact, impeding transportation of the coffee from the farms to the mills and then to the ports. Heavy rains are also likely to increase the rate at which the coffee ripens potentially causing problems if pickers are not able to reach the farms in time especially during the first months of sourcing, December-January.

On the other side of the coin, too little rain in Brazil caused a period of drought, affecting the main coffee producing regions of Brazil during the flowering season in September and October. November proved slightly better, receiving rainfall in the latter two weeks but some producers fear that it has not been enough to make up the deficit as cumulative rainfall is still below the historical average. The situation has been called the “hydric crisis” because of the low percentage of soil moisture. Because of the volatility with the Brazilian currency and combining this with the drought, it is not known yet how and if the quantity and quality will be affected for next season. Brazil has continued to struggle with the global pandemic and has confirmed over 170,000 deaths. It is still showing an upward trend of this key figure but as of yet there is still no sign of introducing more stringent measures to control it, such as lockdowns.

Whilst exports from Brazil continued to surge in December, a decline in shipments from other producing origins partially reduced the downward pressure on prices resulting in an increase across the board. For example Colombia’s average price rose to 170.44 c/Ib which is the highest average price since late 2016. This season Nicaragua is facing a shortage of coffee pickers. This has reportedly been driven by neighbouring countries increasing their production, thus increasing the need for migrant pickers from Nicaragua who receive a higher wage to pick coffee abroad, leaving less workers available to harvest Nicaraguan coffee.

And so ends an unexpected and confusing year, until next time folks!