RPT-POLL-Arabica prices seen rising by end-2021 as deficit looms

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LONDON, Feb 2 (Reuters) - Arabica coffee prices will end this year nearly 8% above current levels as the market moves to price in a deficit next season after working off the current surplus, a Reuters poll of 11 traders and analysts showed.

Arabica prices will end 2021 at $1.35 per pound, up 7.7% from Monday’s close (Feb.1) and 5.3% above levels seen at the end of 2020, based on the median forecast of survey participants.

Top producer Brazil enters an off-year in its biennial crop cycle in the upcoming 2021/22 season and respondents expect a crop of 55.51 million 60-kg bags, down from 69.0 million bags in the current season.

That will leave the arabica market with a deficit of 8.5 million bags next season, though the market is expected to have a surplus of 8 million bags this season.

Arabica prices ended last year down 1.1% as Brazil harvested a record crop, but prices were underpinned by dry weather in the world’s top producer that damaged the outlook for the upcoming crop.

Survey participants said a decline in certified arabica stocks on the ICE exchange towards the year end will help to boost prices, as will a recovery in coffee consumption, though some said the price upside would be capped by the current surplus.

“There is a big surplus in the current season that offsets favourable (macro-economic drivers) and the dry weather in Brazil,” said Rabobank analyst Carlos Mera.

Economies the world over are expected to recover this year, helping to increase coffee consumption, as vaccine rollouts start to have an impact on the spread of the virus.

Prices of robusta coffee, primarily used for instant coffee or added to blends as a cheaper ingredient, are seen ending the year at $1,475 a tonne, up 10.4% from Monday’s close and 6.4% higher than the market close at the end of 2020.

The global robusta market balance is seen as flat this season versus a surplus of 950,000 bags next season, based on the median forecast of survey participants.

Production in Vietnam, the world’s top robusta producer, is forecast at 28.8 million bags this season, down from a U.S. Department of Agriculture estimate of 31.3 million bags for the 2019/20 season. (Reporting by Maytaal Angel. Editing by Jane Merriman)