Global coffee deficit to support prices, limited upside for cocoa in 2021/22 – ING

Coffee prices have traded to the highest levels since 2014. A tight coffee market should continue to support prices. Meanwhile, large cocoa stocks suggest upside for cocoa prices is limited despite a deficit in 2021/22, strategists at ING report.

Diverging trends for coffee and cocoa

“For the 2021/22 coffee year, demand is expected to outstrip supply. This will be driven by a combination of further growth in demand, along with a Brazilian crop weighed down by frost and possibly drought. However, much will depend on precipitation in the coming months. The expectation of a deficit in 2021/22, uncertainty on how big this deficit may be and continued logistical issues globally suggest that prices should remain well supported.”

“Inventories and 2021/22 output should ensure that demand this season is easily met, without putting significant upside pressure on cocoa prices. While prices are likely to be supported due to the market drawing inventories over 2021/22, the level of stock suggests upside will be limited over the course of next year.”