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Virus hurts global coffee sales

Demand for coffee globally is foreseen to drop by one million (60kg) bags in 2020 due to the COVID-19 outbreak. Agribusiness Rabobank’s Q2 2020 Coffee Outlook Harvest Time report, states that global coffee consumption is estimated to decline by 0.8 per cent to 164.1 million 60kg bags in 2020.

Rabobank Agri Commodity Markets Research senior analyst Carlos Mera said that coffee demand will drop by two per cent in the US this year, as less buy coffee in cafes and the country’s low level of unemployment benefits resulting in less consumer spending. But supermarket coffee sales were seen to offset the decline in out-of-home consumption.

“In Europe, we do not expect such a large drop in demand because income levels of those unemployed are more protected in most EU countries. We initially expect a 0.5 per cent reduction in coffee demand in 2020 in the EU-27+UK countries, with the decline concentrated in the UK, where there is a tea culture at home as well as lower unemployment benefits, and in southern Europe, where there has been a lower volume of tourists,” Mera said.

Brazil, which is the world’s largest coffee producer, is at a high risk, as harvest coincides with projected peak COVID-19 infection rates.

“In Brazil, the great 2020/21 arabica harvest is beginning in virtually all regions. Preparations have been made and, as far as we can tell, there is no labour shortage for the time being, though the peak of the harvest will be in June/July,” Mera said.

The report expects dollar commodity prices for coffee to fall in the short term, impacted by the weakness of the currencies in Brazil and Colombia.

In Australia, cafes and food service outlets are trying to get back to business as COVID-19 restrictions ease and the pressure on global coffee prices may spell good news for these businesses.

“Indeed, less out-of-home purchasing has seen downward pressure on a number of soft commodities around the world, which could make the raw ingredient prices for Australia’s café and restaurant sector, including coffee and sugar, dip lower. This may help these businesses as they come out of COVID-19 lockdown and over the coming year or so,” said Rabobank Australia commodity analyst Charles Clack.

But labour costs, overheads and other significant business costs are expected to impact the price for consumers.

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