The International Coffee Organization (ICO) says coffee prices fell sharply at the end of April as institutional investors sold off their positions.
The coffee market continues to be well supplied as total exports in the first half of coffee year 2016/17 are estimated up by 4.8 per cent to 60 million bags. “In the absence of fundamental news, the outlook for the 2017/18 crop is generally positive but some uncertainties remain,” said the ICO.
The monthly average of the ICO composite indicator price decreased significantly compared to last month, down 2.7 per cent to 130.39 US cents/lb. After gaining slightly in the first half of April, daily prices started to decline sharply on 20 April, dropping to a low of 122.25 US cents/lb on 27 April. At month-end, daily prices were 6.9 per cent lower than at the beginning of April.
All three Arabica groups fell significantly but the sharpest decline was recorded for Other Milds, which were down by 3 per cent compared to the previous month. The Arabica/Robusta arbitrage, as measured on the New York and London futures markets, dropped by 1 per cent to 43.92 US cents/lb, the lowest level since January 2014.
“The sudden fall in prices in the second half of April is mainly the result of intensive activities of hedge funds selling off long positions, which had been building up over the past months. This comes against the backdrop of an increasingly positive outlook for sufficient supply of coffee on the world market,” the ICO said.
“The combination of very high exports and growing inventories in consuming countries helped to overcome initial supply concerns. As with other agricultural commodities, the coffee market is experiencing downward pressure. This development is part of a broader decrease of prices in view of supply expectations for agricultural and non-agricultural commodities.”