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C Photo / Tim Mossholder

How did the Futures Market React to the On May 5, 2020, ICO released the April report, stat-
COVID-19 Pandemic? ing world coffee consumption for 2019/20 to be estimated
at 166.06 million bags, an increase of 0.5% comparing with
Since the WHO declared that the COVID-19 outbreak 2018/19. Additionally, the report also addressed that job
was a global pandemic in mid-March, the virus has affected losses could lower demand, particularly for non-habitual
the green coffee’s price, consequently, futures prices have consuming markets, as the global production grows by 1.95
followed the lead. Coffee prices set to rise in short term amid million bags, (117K tones coffee) more than consumption.
supply chain disruptions in later March, at a point when On June 15, 2020, USDA reported the global coffee stocks
inventories were running seasonally low, combined with reached a 6-year high, and it’s expected to grow to near 42
forecasted bad weather in Brazil etc., everyone was expecting million bags (2.52 million tone) by the end of the 2020-21
to see the market continue to go up. The Arabica futures (October-September), this will be the highest in six years.
price in New York market increased by 10.8% in March and USDA stated that global coffee production will reach a record
decreased slightly by 1.2 % in April, averaging 113.61 US of 176.1 million bags (about 10.57 million tone ), that’s 9.1
cents/pound. While the Robusta’s 2nd- and 3rd-position million bags (546K tone) higher than the previous year, the
average futures price in the London market decreased by 2.8 main reason for this surplus due to the large crop of Brazil
% in March and 5.2 % in April, averaging 54.4 US cents/ with 67.9 million bags (4.074 million tone).
pound. As of May 15, the physical spot coffee price remained The following day, on Jun 16, Reuters reported that
on 104.5 US cents/pound and the Arabica futures price on GCA (the U.S. Green Coffee Association) said coffee stocks
106.85 US cents/pound (data taken from Coffee Market at US port warehouses rose 4.6% from end of April to end
Report). In April, physical coffee was trading in backward- of May to 6.818 million bags (409K tone). It is believed
ation and the reasons being: high differentials from origins, that the decrease in out-of-home consumption while the
drawdown of spot coffee value at destination, good nearby surge in demand for coffee in the early days of stay-at-
demand, buyers “reach” for the exchanges for certified cof- home measures led to an overall decline in coffee con-
fee and nearby prices appreciate relative to forward prices. sumption in the US.

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