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Gap between Arabica and Robusta should continue wider than in 2017/18

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SAO PAULO, Brazil – The gap between arabica and robusta prices widened in the Brazilian market in the last months. In general, quotes of both varieties have dropped this season, but robusta quotes are decreasing more sharply, widening the gap to arabica coffee prices.

This season (Jul/18 to April 8 2019), the CEPEA/ESALQ Index for arabica coffee type 6 (delivered in São Paulo) is 103,37 reais per bag higher than the CEPEA/ESALQ Index for the robusta type 6, screen 13, Espírito Santo State. In the same period last season (2017/18), the price gap between these varieties was at 84.61 reais per bag.

The sector expects this price gap to remain stable in the coming months, due to the low price estimates for both varieties. Concerning arabica, the large volume produced in 2018/19, the offset of both Brazilian and global inventories and the nearness of the 2019/20 crop harvesting, whose production should be high for a year of negative biennial cycle, are keeping pressure on quotes.

Besides, although it is still early for speculations regarding the 2020/21 season, production at new crops, which were renewed in the last years, and the positive biennial cycle may increase crops productive potential, keeping pressure on arabica quotes in the mid-term.

As for robusta, production is forecast to be higher too, which should lead to new price drops. Despite the weather issues in the last months, production in 2019/20 should still be high and, with the recent crops renewal, the productive potential should grow too.

Prices

Arabica prices dropped sharply in Brazil in the first fortnight of April, pressed down by agents’ retraction, due to the international devaluation of the variety. Price drops abroad, in turn, were linked to technical factors and higher arabica production in Brazil – in a report released on April 11, IBGE (Brazilian Institute of Geography and Statistics) revised up the arabica output by 1.3%, to 38.7 million bags

On April 15, the CEPEA/ESALQ Index for arabica coffee type 6 (delivered in São Paulo) closed at 380.58 BRL (98.34 USD) per 60-kilo bag, 3.2% down compared to that on March 29.

Concerning robusta, quotes decreased too, pressed down by the international devaluation of the US dollar. The CEPEA/ESALQ Index for the robusta type 6, screen 13, Espírito Santo State, closed at 289.48 BRL (74.80 USD) per 60-kilo bag on April 15, 4.3% down in the same comparison.

Exports

In March, the Brazilian exports of green coffee (arabica and robusta) decreased 18.8% compared to February, but increased 14.2% compared to March/18, according to Cecafe (Coffee Exporters Council).

Despite the decreases, the volume shipped last month is still considered positive, due to the offseason period and the record exports in January and February. The 2018/19 season is expected to end with record exports, near 40 million bags.