ICO Reports Coffee Market’s Downward Trend Continues
Since August 2017, the International Coffee Organization (ICO) composite indicator price has declined in each month except January 2018. The composite indicator decreased by 1.1% in March 2018 to an average of 112.99 US cents/lb, which is the lowest monthly price since February 2016. The daily composite indicator started the month at a high of 115.23 US cents/lb, but generally fell during the rest of the month. It reached a low of 110.73 US cents/lb on 23 March 2018. Aside from 12 December 2017, this was the lowest daily value for the ICO composite indicator since 2 March 2016.
Indicator prices for all groups fell in March 2018, though the largest month‐on‐month decrease occurred for Colombian Milds, which fell by 1.4%, to 139.45 US cents/lb. This narrowed the price differential between Colombian Milds and Other Milds to an average of 4.42 US cents/lb, 15.3% lower than last month.
Global production is estimated at 159.66 million bags in 2017-18, 1.2% higher than 2016-17, resulting in an estimated surplus of 0.78 million bags. Arabica production is estimated 4.6% lower at 97.43 million bags while Robusta is estimated 12.1% higher at 62.24 million bags. The surplus in production is reflected in increased shipments for all groups, except Colombian Milds, during the first five months of coffee year 2017-18.
Prices for all group indicators drove the decline in the monthly composite indicator in March 2018. Colombian Milds fell by 1.4% to an average of 139.45 US cents/lb. Other Milds and Brazilian Naturals declined by 0.9%, to 135.03 cents/lb and 119.80 cents/lb, respectively. Because of these movements, the differential between Colombian Milds and Other Milds decreased by 15.3% to an average of 4.42 US cents/lb. The monthly average for the Robusta group decreased by 1.2% to 88.18 US cents/lb, reversing the slight upward movement in February 2018. The average arbitrage in March, as measured on the New York and London futures markets, fell by 3.8% to 41.80 US cents/lb, which is the lowest level since July 2017. Additionally, intra‐day volatility of the ICO composite indicator price decreased by 0.9 percentage points to 4.3%.
Global coffee production in 2017-18 is estimated at 159.66 million bags, 1.2% higher than 2016-17 with a 12.1% increase in Robusta output offsetting a 4.6% decline in Arabica production. In February 2018, world coffee exports amounted to 9.93 million bags, up 0.4% compared with February 2017. The volume exported between October 2017 and February 2018 totalled 50.98 million bags as against 49.41 million bags for the same period in 2016-17, an increase of 3.2%.
The decline in Arabica production is driven by lower output of Colombian Milds at 15.21 million bags (‐4.6%) and Brazilian Naturals estimated at 50.23 million bags (‐9.6%). However, production of Other Milds is estimated at 31.98 million bags, 4.3% higher than last year. Colombia’s production is estimated at 14 million bags, 4.3% lower than last year. According to data from the National Federation of Coffee Growers of Colombia, the country’s total output for October 2017 through February 2018 reached 6.27 million bags compared to 6.94 million bags for the same period one year ago.
In the last five years, output during the first five months of the coffee year has been around 43% of the total. The decline in production of the Brazilian Naturals group can be attributed largely to a decrease in Brazil’s production. Total output of Other Milds is estimated at 31.98 million bags in 2017-18, an increase of 4.3% compared to last year with output from the top four growers of this type estimated to increase. Arabica exports reached 32.47 million bags during the first five months of coffee year 2017-18, 2.1% higher than the same period last year as increased shipments of Other Milds and Brazilian Naturals offset a lower volume of Colombian Milds. Other Milds and Brazilian Naturals’ exports increased by 7.6%, to 9.99 million bags and by 4% to 16.30 million bags, respectively. However, shipments of Colombian Milds fell by 9.9% to 6.18 million bags. The decline in shipments of Colombian Milds reflects the lower output from Colombia in the first five months of the coffee year while the greater availability of Other Milds has led to increased shipments of this type. Growth in shipments of Brazilian Naturals was led by Ethiopia, which exported 0.96 million bags in the first five months of coffee year 2017-18, 42.4% than one year ago.
Robusta production rose from 55.6 million bags in 2016-17 to 62.24 million bags in 2017-18 due largely to increases in output from Vietnam, Indonesia and Brazil. Vietnam’s production is estimated at 29.5 million bags in coffee year 2017-18, 15.5% higher than last year, nearly all of which is comprised of Robusta. Indonesia’s production is estimated at 12 million bags in 2017-18, 4.4% higher than last year, while India’s production is estimated 12.3% higher at 5.84 million bags. Production growth has been matched by Robusta exports, which rose by 5.2%, to 18.52 million bags in the first five months of coffee year 2017-18. Vietnam’s exports of green Robusta have trailed behind shipments during the same period one year ago as rainfall delayed harvesting at the start of the season. Vietnam’s green Robusta shipments for October 2017 through February 2018 amounted to an estimated 9.64 million bags compared to 9.75 million bags for the same period in the previous season. India’s exports of green Robusta coffee rose by 16.2%, to 1.27 million bags in the first five months of 2017-18 while shipments from Uganda increased by 9.6%, to 1.47 million bags.
Coffee year 2017-18 is estimated to be in surplus for the second consecutive year, with production exceeding consumption by 778,000 bags. This excess is weighing down on global coffee prices in the current coffee year. Additionally, exports in the first five months of the year have increased compared to the same period in 2016-17, a year in which record export volumes were recorded. This has put pressure on prices as the market was well-supplied at the start of the coffee year.
Stocks in importing countries reached a record level of 26.33 million bags at the end of June 2017 and declined to 25.59 million bags at the end of September 2017. June2009 was the last time stocks in importing countries had reached this level