The World Bank’s Beverage Price Index rose 5 in 2021Q2 (y/y), reflecting a strengthening in the price of Arabica coffee and, to a lesser extent, gains in Robusta and tea—although the latter has been volatile. The index is expected to post small gains in 2021 and 2022.
Coffee prices gain momentum. Arabica and Robusta coffee prices averaged nearly 20 percent higher in 2021Q2, y/y. Global coffee production for the current crop year is likely to grow 6.4 percent which, combined with an estimated 1.7 percent increase in consumption, would result in a surplus of nearly 7 million bags. However, a sizable deficit is expected in the 2021-22 crop season due to anticipated production shortfalls in Brazil, and this has fueled the recent spike in coffee prices. By some estimates, Brazil’s coffee production—typically more than one-third of global output—may decline by as much as 30 percent due adverse weather. Arabica and Robusta prices are expected to average more than 5 percent higher in 2021 compared to last year, with a smaller projected increase in 2022.
Cocoa prices were stable in the first half of 2021. Global cocoa production for the current crop season is projected to be nearly 5 percent higher than 2019-20 due to good weather conditions in West Africa, especially Côte d’Ivoire, the world’s largest supplier. Global grindings, a measure of demand, which picked up recently following a slump during the pandemic, is projected to increase about 2 percent this season, pushing up stocks by about 10 percent. Cocoa prices are expected to remain fairly stable in 2021 and 2022, as the global market appears adequately supplied.
Tea prices followed diverse trajectories. Tea prices at the Mombasa (Kenya) and Colombo (Sri Lanka) auctions declined marginally in 2021Q2 following better-than-expected supplies due to exceptional weather conditions, especially in East Africa. Price at the Kolkata (India) auction, however, spiked in 2021Q2 as erratic weather in Assam is taking a toll on India’s tea production. Assam, which accounts for more than half of India’s total tea output, may experience a 10 percent declined in yields. Prices at Kolkata had been declining until February 2021, following their all-time high over $4/kg in August 2020 due the COVID-19 lockdown. Tea prices are expected to average 7 percent lower in 2021 before making gains in 2022.
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