Prices for all ICO group indicators fall in January

In its latest report, the International Coffee Organisation (ICO) announced that January’s composite indicator reversed its gains from December, averaging 106.89 US cents/lb as prices for all group indicators fell.

After two months of increases, the ICO composite indicator fell by 8.9% to 106.89 US cents/lb in January 2020. The daily price of the ICO Composite ranged between 99.78 US cents/lb on 29 January and 115.18 US cents/lb on 2 January. The 2020-21 Brazilian crop, which would be an on-year of its biennial Arabica cycle, and broader macroeconomic uncertainty exerted negative pressure on the market.

Prices for all group indicators fell in January 2020, reversing the gains made in December. Brazilian Naturals saw the largest decrease, of 12.4%, to 110.73 US cents/lb. Other Milds fell by 9.5% to 142.19 US cents/lb, while Colombian Milds decreased 8.7% to 147.52 US cents/lb. As a result, the differential between Colombian Milds and Other Milds widened in January 2020, rising by 21.4% to 5.33 US cents/lb. Prices for Robustas decreased by 3.7% month-on-month to 70.55 US cents/lb, partly in response to increased shipments of Robusta from Vietnam and Indonesia.

The spread between Arabica and Robusta coffees, as measured on the New York and London futures markets, decreased to 56.02 US cents/lb, following four months of increase. The New York Arabica futures market fell by 10.9% to an average of 117.05 US cents/lb in January 2020, the second highest monthly average in the last twelve months, while the London Robusta futures market declined by 4.5% to 61.03 US cents/lb. Certified Arabica stocks increased by 7.2% month-on-month to 2.49 million bags while certified Robusta stocks fell by 3.4% to 2.45 million bags in January 2020.

The volatility of the ICO composite indicator increased by 0.9 percentage points to 10.6% over the past month. The volatility of all Arabica indicators rose in January 2020: Brazilian Naturals by 1.7 percentage points to 13.8%, Other Milds by 1.5 percentage points to 11.1% and Colombian Milds by 1.2 percentage points to 10.7%. The Robustas group indicator volatility was 8.1%, a decrease of 0.7 percentage points from December 2019.

Global exports in December 2019 totalled 10.3 million bags, compared with 10.27 million bags in December 2018. Exports in the first three months of coffee year 2019-20 decreased by 5.8% to 29.01 million bags compared to 30.78 million bags in 2018-19. During this period, shipments of Arabica fell by 10.1% to 18.28 million bags, but Robustas increased by 2.7% to 10.73 million bags. The decline in Arabica exports has been driven largely by a fall in shipments of Other Milds and Brazilian Naturals, which declined by 13.8% to 4.22 million bags and by 13.3% to 9.95 million bags, respectively. However, exports of Colombian Milds rose by 3.7% to 4.12 million bags and Robustas by 2.7% to 10.73 million bags.

Total exports by Africa in the first three months of 2019-20 increased by 6.3% compared to the previous year to reach 3.25 million bags. Uganda was the largest exporter in Africa, at 1.15 million bags, followed by Ethiopia at 927,000 bags. As a result, Africa has increased its share of world exports to 11.2% compared with 9.9% for the first three months of 2018-19.

In Asia & Oceania, exports increased by 0.3% to 8.98 million bags, but are below the record of 10.26 million bags achieved in the first three months of 2016. Vietnam was the leading exporter in the region, with shipments of 6.05 million bags, a 10.7% decrease on October to December 2019. During this period, exports contained mostly last season’s crop as harvesting of the new crop was still underway. However, Indonesia recorded a strong increase as it more than doubled its volume to 1.48 million bags while shipments from India rose by 0.5% to 1.07 million bags. Asia & Oceania accounted for 31% of total exports during the first three months of coffee year 2019-20.

A decrease of 9.9% was recorded in Mexico & Central America, with exports of 1.51 million bags representing their lowest level since 2015-16. Shipments from the region’s two largest producers fell in the first three months of the coffee year. Exports from Honduras decreased by 8.3% to 522,000 bags, and from Mexico by 15.3% to 427,000 bags. However, shipments from Guatemala rose by 9.7% to 302,000 bags, and from Nicaragua by 7.1% to 170,000 bags. As a result, Mexico & Central America accounted for some 5.2% of world exports, slightly less than in 2018-19.

In South America, exports fell by 10.7% to 15.27 million bags in October to December 2019. Brazil exported 9.94 million bags, 14.4% less than in 2018-19, reflecting the smaller harvest from its off-year crop in 2019-20. Colombia’s shipments increased by 4.8% to 3.76 million bags as exports of green coffee rose by 5.3% to 3.5 million bags and those of roasted coffee increased by nearly 50% to about 46,000 bags. While its soluble exports fell by 8.4% to 211,000 bags compared to the first three months of coffee year 2018-19, the volume is the second highest on record. Peru’s exports declined by 19.7% to 1.41 million. Despite the large drop, South America is still by far the largest source of coffee exports, accounting for 52.6% of the world total, down from 55.5% in 2018-19.

Total production in coffee year 2019-20 is estimated at 168.71 million bags, a 0.9% decrease on the previous year. Smaller harvests are provisionally forecast for Africa and South America, by 2.3% to 18.19 million bags and by 4.7% to 78.33 million bags, respectively. In Asia & Oceania however, production is estimated at 50.65 million bags, a 5.4% increase from 2018-19 while output from Mexico & Central America is provisionally estimated to rise by 0.9% to 21.54 million bags. Total consumption is estimated at 169.34 million bags in 2019-20, which would lead to a projected deficit of 0.63 million bags. This may put upward pressure on prices during the coffee year, but price increases will be tempered by Brazil’s upcoming crop in 2020-21, which is another on-year for its Arabica harvest.

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