The International Coffee Organization (ICO) says its composite indicator price recently rose above 130 US cents/lb for the first time since April 2017 as reports emerged from Brazil about lower yields and quality issues related to the 2017/18 crop.
The ICO said coffee exports have stabilized in the last two months but cumulative exports remain well above the levels reached in the previous year and leave consumer stocks well supplied. The production estimate for 2016/17 has been revised up to 153.9 million bags, which constitutes an all‐time record. The output of Arabica and Robusta is estimated to be 10.2 per cent higher and 10.6 per cent lower compared to coffee year 2015/16, respectively.
Coffee prices in July increased significantly with the monthly average of the ICO composite indicator prices up 4 per cent to 127.26 US cents/lb. Initially, the daily price weakened slightly, reaching its low of 122.71 US cents/lb on 11 July but then increased steadily until the end of the month. The indicator price climbed to 131.52 US cents/lb on 31 July, an increase of 6.66 US cents/lb from 3 July and the highest level since the end of April 2017.
“Market developments in July seem to have been caused by a combination of specific agronomic and wider economic factors potentially affecting coffee supply from Brazil,” said the ICO, noting that reports have emerged that farmers in Brazil’s Arabica‐growing regions, who are currently harvesting the 2017/18, crop are faced with unexpectedly low yields.
“Beans are smaller than usual due to unfavourable weather conditions earlier in the season. This is exacerbated by considerable damage resulting from a berry borer infestation,” the ICO said, adding that the ban on use of the highly controversial but effective endosulfan insecticide used by farmers in the past has led to significant spread of this pest. Up to 30 per cent of the crop is estimated to have been affected in major growing areas, with a negative impact on bean quality.
The weakening US dollar has reduced the competitiveness of Brazilian coffee on the world market, hampering exports.