Volatile coffee prices: covid-19 and market fundamentals

Over the past three months, coffee prices have experienced multiple spikes and high volatility. This is in contrast to world market prices of major staple foods, which have remained relatively stable. While experts initially attributed the instability of coffee prices to supply-side uncertainty and market tightening, the covid-19 pandemic seems to have aggravated coffee’s price fluctuations. The novel coronavirus represents an unprecedented joint supply and demand shock to the global coffee sector, constituting an enormous challenge to coffee growers, farm workers, and downstream value chain actors. These various supply and demand impacts will be felt at different points in time further contributing to global market uncertainties and the ongoing price volatility. The pandemic may also have major implications for poverty and food insecurity for the world’s 25 million coffee producers, most of whom are smallholders in low- and middle income countries that are unprepared to respond to a public health crisis of this proportion.