Header ad
The Independent Voice of the Commodity Industry
COFFEE MARKET WEAKENS DUE TO HIGH EXPORTS AND INVENTORY LEVELS

COFFEE MARKET WEAKENS DUE TO HIGH EXPORTS AND INVENTORY LEVELS



The International Coffee Organization (ICO) says that in March 2017 the ICO composite indicator price fell slightly. While Robustas remained broadly stable, Arabica prices were under pressure.

Despite the poor Conilon/Robusta harvest in Brazil and Vietnam, the market remained well supplied as export levels in the period October 2016 to February 2017 were higher than the year before, while inventories in importing countries continued to grow. “In combination with an increasingly positive outlook for the 2017/18 crop, the market currently lacks any strong signals to reverse from its current gradual decline,” said the ICO.

The monthly average of the composite indicator was down by 2.6 per cent to 134.07 US cents/lb in March from 137.68 US cents/lb recorded in February.

The group indicators were showing a mixed picture. On the one hand, the monthly averages of the Arabica groups significantly decreased, with Colombian Milds, Other Milds and Brazilian Naturals down by 3.2 per cent, 3.7 per cent and 4 per cent, respectively.

Prices for Robustas on the other hand remained broadly stable with little in‐month variation. The March monthly average of 106.73 US cents/lb constitutes a marginal increase of 0.2 per cent compared to 106.49 US cents/lb recorded in February. The arbitrage between the London and New York futures markets continued to decrease, down by 11.6 per cent from 50.18 US cents/lb to 44.37 US cents/lb.

“The development of coffee prices in March was mainly driven by the fact that supply remained ample despite the poor Conilon/Robusta harvest in Brazil and Vietnam. World market prices for Robusta have been relatively high as indicated by the ICO Robusta indicator price which has been consistently above 100 US cents/lb since October 2016,” said the ICO. “This has led to the drawdown of stocks in Vietnam somewhat compensating for hampered Robusta exports from Brazil. In the first five months of coffee year 2016/17 (October 2016 to February 2017) Vietnam is estimated to have shipped 10.18 million bags, an increase of 11.5 per cent compared to the same period last year.

At the same time, Arabica availability on the market remains high. Colombia’s production and exports continue to grow as resistant coffee trees planted following the coffee leaf rust crisis in 2010 have become fully productive.

Other producers such as Indonesia, Honduras, India, Peru, and Uganda, which make up almost a quarter of global exports, significantly increased their shipments in the first months of coffee year 2016/17.

The highest increase was observed in Honduras with exports totalling 2.31 million bags, up by 35.6 per cent compared to 1.71 million in 2015/16. However, it remains to be seen if this growth is sustainable as reports emerge of a new outbreak of leaf rust in Honduras.

Related posts

Leave a Reply

Your email address will not be published. Required fields are marked *