There is one raw product that did not participate in the Rally prices for commodities of this year - this is coffee. Perhaps the prices of it are only preparing for growth, because this year it is predicted that revenues from the sale of grain and soluble coffee will grow by 20% year in annual terms.
There are reasons for such price lags. Analysts are afraid that the predictions on the volume of coffee sales may be erroneous if the network like Starbucks (NASDAQ: SBUX), Costa Coffee, which owns Coca-Cola (NYSE: KO), Dunkin Donuts and Panera Bread (NASDAQ: PNRA) will be shown weaker Results due to restrictions related to coronavirus pandemic.
Demand in coffee shops remains very low
Analyst in the markets of crops of the Chicago company price Futures Group Jack Skoville says that there is a clear relationship between premium grain prices of Arabica varieties and forecasts for sales for leading coffee shop brands and snack bars:"Demand from coffee shops and other catering establishments still remains at a very low level. Reports indicate that consumers at home will brew coffee with a large content of Robust varieties and a smaller variety of Arabica. "
Robust variety is stronger and bitter taste - grown exclusively in Eastern hemisphere, mainly in Africa, Indonesia and Vietnam. Futures for the supply of this coffee variety on the London Commodity Exchange on Tuesday rose to $ 1323 per ton or $ 0.61 per pound.
Coffee connoisseurs believe that the Arabic variety has a thinner and sweet taste. This coffee grows mainly in Latin America (Brazil and Colombia), as well as in Africa and Papua New Guinea. Futures for the supply of this variety of coffee are traded in New York on Tuesday at $ 1,23, which is approximately two times higher prices for coffee robust.
Coffee: Weak Start 2021
However, despite the taste, preferences or prices, both varieties in 2021 still demonstrate a weak dynamics after stability at the end of last year.
At the moment, from the beginning of the year, the price of coffee varieties of Arabica decreased by 4%, and on Robust - by 2%. This year, prices for many food commodities have grown significantly: sugar rose 5%, corn - by 13%, and pork is 21%. Even stronger than the price rose energy and metals.
In the latest forecasts for the year, the Statista business platform gave a forecast that cumulative income from the sale of grain and soluble coffee will grow by 20% - to $ 81.2 billion.
Coffee sales in the UK can return to the level before the pandemic after four years
This is consistent with another forecast, which, according to Bloomberg, gave Allegra Group, specializing in the coffee market. In the Allegra Group's forecast, it is said that the networks of British coffee shops may be required up to four years to return to sales levels preceding COVID-19 pandemics. Over the past year, the sales of British coffee shops fell in the amount of 2 billion pounds ($ 2.8 billion).In 2020, sales in the Brendous Coffee Houses of Great Britain, including Costa Coffee and Starbucks, decreased by almost 40% due to locked and maintenance only.
It is expected that the sales of coffee in the UK will be restored by 2024, although Allegra declares that it is very doubted this forecast.
According to the analytical company, the BRAND Sector of the British Coffee Networks, which demonstrated the highest indicators in Europe, was also injured due to the economic consequences of Brexit. Last year, the first decline in coffee sales for more than two decades has occurred.
The founder and executive director of Allegra Group Jeffrey Yang believes that the study disclosed not too attractive picture in the market:
"The United Kingdom faced the situation of the ideal storm in several factors that are unfavorable for the coffee market. In addition, in the UK, much more uncertainty than in Europe. "
Pop culture as a coffee market recovery factor
Now the business is forced to limit attendance and strengthen social distance in its premises. Coffee houses, under the promotion, scored by students, freelancers and merry companies moved into the past.
But, although the culture of coffee shops and undergoes these short-term changes, something remains unchanged: people like coffee.
As the center of the creative process, the coffee shops act persistently and ingeniously to survive and even succeed in a pandemic situation.
In December, Starbucks announced plans for the launch of another 200 thousand coffee shops, which will allow it to open their points at the intersections of each important US street.
Farmers are unhappy with coffee prices
Meanwhile, coffee makers from Brazil to Vietnam are trying to find a positive, despite the weak position of coffee relative to the other commodity rally.This is how Skoville says about it:
"The vintage of coffee in Vietnam was collected in predominantly dry conditions. Some of the batches of coffee began to be supplied to the market, but farmers do not like prices. In Central America also becomes land for harvest, but farmers are dissatisfied with prices "
In addition to the same thank 2019, when coffee makers received a huge profit of 27%, and a good profit of 8% in 2016, Arabica after 2016 is experiencing difficult times, giving an average profit of 0.3%. On this commodity product it was almost impossible to earn - neither long, nor in short positions.
Technical analysis: "Actively sell" by Arabica, "actively buy" by Ruses
Investing.com technical outlook shows "actively selling" for Futures on Arabic Coffee Grain.
At the time of writing, Arabica's coffee is $ 1,2305 per pound, which indicates a "bearish" trend. The following fibonacci resistance levels are predicted: $ 1,2067, $ 1,2028 and $ 1,1990.
In the event of a market reversal towards growth, three levels of support are predicted: $ 1,2163, $ 1,2192 and $ 1,2240.
In any case, the reversal point is at a value of $ 1,2115.
Oddly enough, the technical analysis of Investing.com on the Robust variety shows "actively buying".
At the time of writing, Robust coffee is $ 1.343 per pound, giving a "bullish" trend. The following fibonacci resistance levels are predicted: $ 1.348, $ 1.354 and $ 1.362.
In the event of a reversal of the market towards the decline, three levels of support are predicted: $ 1,332, $ 1.326 and $ 1.318.
In any case, the reversal point is at a value of $ 1,2115.
As with other technical forecasts, we urge you to follow our inner aspirations, but to check them with the fundamental principles of trading and, if necessary, make adjustments.
Disclaimer. Bararan Krisnan gives the opinions of other analysts to submit a versatile market analysis. To represent a more complete picture on Investing.com, it leads the economic indicators and opinions of other market analysts.
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