Demand in Coffee Shops ‘Still Very Low’
Jack Scoville, head of crop research at Chicago-based Price Futures Group, points out that there is a definite correlation between the prices of premium arabica coffee beans and the sales prospects of the most popular cafe and restaurant chains:
“Demand from coffee makers and other food service providers is still very low. Reports are that consumers are consuming less arabica and more robusta blended coffees.”
Arabica, which is a higher quality breed compared to coffee experts and has a softer and sweeter taste, is mostly produced in Africa and Papua New Guinea, along with Brazil and Colombia. This coffee, traded in New York, was traded at $ 1.23 per pound on Tuesday, nearly double the price of robusta.
Coffee Starts Poorly To 2021 Despite Rally In Commodities
But beyond taste, quality and price, both arabica and robusta coffee beans are experiencing a weak 2021 so far, after completing last year at a steady level.
In its latest estimates, Statista announced that it expects total revenue from roasted and instant coffee products to reach $ 81.2 billion this year, up 20%.
UK Coffeemakers May Take Four Years to Return to Pre-Epidemic Sales Levels
According to Bloomberg’s report, market researcher Allegra Group stated that it may take four years for coffee chains in the UK to return to their pre-epidemic sales levels after the loss of nearly £ 2 billion ($ 2.8 billion) in sales last year.
With temporary closures and pick-up and home delivery only, sales of the largest coffee chains in the UK such as Costa Coffee and Starbucks fell by almost 40% in 2020.
The industry is expected to return to pre-epidemic levels by 2024, but Allegra said there are “serious uncertainties” about this outlook.
The UK coffee industry, which has the highest number of branded chain branches in Europe, also suffered serious damage from the economic effects of Brexit, according to Allegra. Over the past year, sales have declined for the first time in more than two decades.
Jeffrey Young, Allegra’s founder and CEO, said the view from the research was not very pleasant:
“The UK has faced a perfect storm of many factors going wrong for the coffee segment, and the uncertainty in the UK is much higher compared to Europe.”
The Importance of Coffee in Popular Culture Market’s Biggest Advantage
According to commentators, with the number of customers and social distance restrictions imposed by businesses, coffee shops that we are used to seeing, often full of students studying, remote workers, and groups of friends having fun, temporarily disappeared from the eyes.
But while coffee culture requires short-term changes, one thing remains constant: people’s love for coffee.
Therefore, as a center of creativity, coffee makers use their stability and creativity to survive and even become stronger during the coronavirus epidemic.
Starbucks announced in December that it plans to open 200,000 new branches, and with this move, there will be a Starbucks branch on almost every corner of major cities in the US.
Farmers Are Not Satisfied With Coffee Bean Prices
From Brazil to Vietnam, coffee growers want to give hope despite weak core prices in the commodity boom.
“Vietnam has largely harvested in dry weather. Some of these crops have begun to enter the market, but farmers are unhappy with the prices. Central America is dry for harvest but producers are asking for higher prices.”
Except for 2019, where it jumped 27%, and 2016, where it gained a relatively modest 8%, arabica has performed poorly since 2016, with an average compound return of 0.3%. Long or short, nothing has happened to return on commodities.
Technically “Strong Sell” for Arabica, “Strong Buy” for Robusta
The technical outlook presented by Investing.com’s daily indicators gives a “Strong Sell” signal for arabica.
At the time of this writing, a three-tier Fibonacci support is foreseen at $ 1.2067, $ 1.2028 and finally $ 1.1990, should the caribana, which is traded at $ 1.2305 per pound, enter a downtrend.
Should the market turn positive, a three-tier Fibonacci resistance is expected at $ 1.2163, 1.2192 and finally at $ 1.2240.
Either way, the pivot point between the two is $ 1.2115.
Robustada, Investing.com’s Daily Tech advice is surprisingly “Buy Strong”.
A three-tier Fibonacci resistance is predicted to form at $ 1,348, 1,354 and finally $ 1,362, if the robustan, which is traded at $ 1,343 at the time of this writing, gives a signal of strength.
If the uptrend loses strength and the market declines, a three-tier Fibonacci support is expected at $ 1,332, 1,326 and finally $ 1,318.
In any case, the pivot point between the two is $ 1.2115.
As with all predictions, I recommend that you keep track of the graphs but include the basics as much as possible into your assessment.
Explanation: Barani Krishnan includes various opinions that are not his own, in order to add variety to his analysis in every market he examines. It does not hold an asset or position in the commodities or securities it has written.
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