According to The Wall Street Journal, the coffee market has been fragmented since lockdowns during the COVID-19 pandemic forced a shift in global consumer behavior.

On the U.S. ICE Intercontinental Exchange, Arabica coffee futures were down nearly 9% in 2020. Arabica is a softer, sweeter variety, mostly from Latin America and popular in cafes and restaurants.

Robusta futures in London were down less than 3 percent. Robusta futures are mostly used in freeze-dried coffee or in espresso capsules. This stronger-flavored coffee is usually grown in Vietnam.

Analysts say the pandemic has changed where and how most people in the West consume coffee. Many restaurants and cafes have closed due to lockdown measures, complicating demand measurement. Meanwhile, the coffee market is facing an oversupply, in part due to a bumper crop in Brazil, the world’s largest coffee producer. Combined, these factors could derail the recovery in coffee prices.

“High supply and weak demand make it more difficult to recover prices that have fallen in recent months,” said Michaela Helbing-Kuhl, an agricultural analyst at Commerzbank.

According to forecasts from the U.S. Department of Agriculture, coffee consumption could drop for the first time since 2011 in the marketing year that ends in September. Coffee consumption could edge up by 1.5% next year to 166.3 million bags, the agency said.

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Analysts say emerging markets such as Brazil have seen much less demand for coffee than developed countries such as the United States. The change in global consumption habits is unprecedented. It is difficult to say whether the increase in consumption by people working from home and drinking coffee at home will be enough to offset the decline in consumption in cafes and restaurants.

Even in normal times, gauging current demand is difficult, said Steve Pollard, a coffee analyst at brokerage Marex Spectron.

Supermarket sales data can be used to measure household consumption. At the same time, revenues from large coffee chains can provide an indicator of outdoor demand, but neither captures the overall picture, Pollard said. Many of the largest coffee-consuming countries, such as Brazil, only collect some data on coffee drinking, while others have no data at all. Broad indicators, including imports and exports, can provide an indicator of demand over time.

Global coffee supplies are expected to reach their highest levels on record in 2020, despite ongoing uncertainty from the pandemic.

Jose Sette, executive director of the International Coffee Organization, said: “Our sense from talking to market players is that the reduction in outdoor coffee consumption is greater than the increase in household coffee consumption. Therefore, it is unlikely that the increase in household consumption will fully compensate for this loss, but the specific How much to make up remains to be guessed.”

The supply situation is more clear: Next year’s coffee bean harvest is expected to be the highest on record, with the USDA forecasting production of 176.1 million bags.

Traders’ fears that the outbreak could lead to supply disruptions, especially if farms are short of labor or if border controls and port closures limit shipments have largely gone unfulfilled.

The highly mechanized Brazilian farms, in particular, have managed to avoid any disruption, putting the country on track for a record harvest in the marketing season that begins in October. Brazil’s Production is likely to be close to 68 million bags, the largest ever in Brazil.

The supply of Arabica beans could still be at risk if smaller farms in Colombia and Costa Rica struggle to find the skilled migrant workers they depend on for a living, said Priscilla Daniel, a senior coffee trader at London-based DRWakefield. Arabica coffee beans account for about 60% of the global coffee trade. The coffee consumed at home is usually a blend of Robusta and Arabica.

“Without experienced pickers and fewer pickers per square meter, the best time to pick is missed, and the coffee quality may not be as good,” Daniel said. Poor quality coffee beans that don’t meet export standards could mean Production on the international market will decrease."

The slump in Arabica coffee futures this year has made it one of the worst-performing major commodities, with U.S. oil prices also down 35%. In contrast, gold has risen more than 30% this year, and copper has largely held its value, up 3.5%.

Analysts said coffee prices could recover if government stimulus boosts consumer spending and encourages people to go to cafes and restaurants. But changes in coffee-drinking habits may be permanent.

Sette from the International Coffee Organization said: “Long-term, I am very confident in consumer demand for coffee, but if we move into a world where more people work from home, what will be the longer-term changes?”

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