Coffee price rise continues in November, reaching 10-year high
The International Coffee Organization (ICO) announced in its latest report that coffee prices reached new multi-year highs in November 2021. These price levels during coffee year 2021/22 mark a significant and steady recovery from the low levels experienced over the four preceding coffee years. Estimates of total production for coffee year 2020/21 remain unchanged at 169.64 million 60-kg bags. However, world coffee consumption is assessed marginally up in volume, now estimated to have increased to 167.67 million bags in 2020/21 versus 164.53 million bags for coffee year 2019/20.
Since November 2020, where the ICO Composite Indicator was priced at 109.70 US cents/lb, an increase of 77.9% has been recorded. Moreover, the average price of November 2021 is the 10-years high since it was 193.90 US cents/lb in October 2011. The monthly average for September 2011 was 213.04 US cents/lb. The steady upward trend observed since the start of coffee year 2020/21 shows how the recovery of coffee prices, after four consecutive years of low-price levels, reflects a dramatic change in overall market conditions.
Prices for all group indicators increased in November 2021 and reached their highest levels in several years. The highest increase occurred in the Brazilian Naturals Group indicator price, which reached 218.90 US cents/lb, an increase of 9.5% as compared to 199.98 US cents/lb registered in the previous month, more than doubled compared with November 2020, increasing by 105.7%. The price for the Colombian Milds increased by 8.0% to 279.56 US cents/lb in November 2021 as compared to 258.87 US cents/lb in October 2021. It also represents a rise of 73.4% from 161.21 cents/lb recorded in November 2020. Prices for the Other Milds increased by 7.4% to 258.95 US cents/lb in November 2021 as compared to 241.06 US cents/lb in October 2021. Moreover, compared to its level of 150.73 US cents/lb in November 2020, the Other Milds indicator increased by 71.8%. Robustas, priced at 109.40 US cents/lb in November, showed steady growth and increased by 4.0% in between October 2021 and November 2021.
The differential between the Colombian Milds and Other Milds increased substantially, rising by 15.7% from 17.81 US cents/lb in October 2021 to 20.60 US cents/lb in November 2021. The differential between the Colombian Milds and Brazilian Naturals increased by 3.0%, from 58.89 US cents/lb in October 2021 to 60.66 US cents/lb in November 2021. The differential between the Colombian Milds and Robustas increased by 10.8%, from 153.63 cents/lb in October 2021 to 170.16 US cents/lb in November 2021. The differential between the Other Milds and Brazilian Naturals decreased by 4.2% to 40.06 US cents/lb in November 2021 from 41.82 US cents/lb in October 2021. The arbitrage between Arabica and Robusta coffees, as measured on the New York and London futures markets, increased by 28.3% at 123.64 US cents/lb in November 2021, as compared with 96.39 US cents/lb in October 2021.
As coffee prices continued to increase, intra-day volatility in November 2021 of the ICO composite indicator price increased by 1.2 percentage points to 9.5% in November 2021. The Brazilian Naturals indicator showed a growing volatility of 11.8% in November 2021, as compared to 10.7% in October 2021 being the highest among all the groups. The Colombian Milds recorded a level of volatility at 9.3% in November 2021, as compared to 8.6% recorded in October 2021. Volatility for the Other Milds increased slightly from 9.5% in October 2021 to 10.2% in November 2021. Robusta price had the lowest volatility at 7.4% in November 2021, but higher than the level of 5.3% in October 2021. The volatility of New York futures market was 11.9% in November 2021, as compared to 11.1% in October 2021. The volatility of London futures market increased by 1.9 percentage points to 7.5%, as compared to 5.6% in October 2021.
Estimates of total production for coffee year 2020/21 remain unchanged at 169.64 million bags, representing a 0.4% increase as compared to 169.00 million bags during the previous coffee year. Arabica production is assessed to have increased by 2.3% to 99.27 million bags from 97.08 million bags in 2019/20, while the production of Robusta is gauged as 70.38 million bags, down 2.2% year-on-year from 71.92 million bags in the previous year. At the regional level, output from
Africa is revised down marginally to 18.74 million bags as compared to the level recorded in the previous coffee year. The estimate for Asia & Oceania remains near the same as the previous month’s evaluation: down by 1.1% from 49.46 million bags in 2019/20 to 48.91 million in 2020/21. Production in Central America and Mexico is expected to decrease by 2.1% at 19.19 million bags against 19.60 million bags in coffee year 2019/20. An increase of 2.0% in production is expected from South America at 82.80 million bags, as compared to 81.21 million bags in 2019/20. Looking at the current crop year 2021/22, the frost in Brazil coupled with the “off-season” for its Arabica remain as the two main factors negatively affecting the outlook for the global green bean coffee production.
World coffee consumption is assessed marginally up in volume, now estimated to have increased to 167.67 million bags in 2020/21 as compared to 164.53 million bags for coffee year 2019/20. The gap production-consumption for 2020/21 is therefore reducing to 1.97 million bags. The outlook, however, has been turned around with the prospect of further easing of pandemic restrictions related to covid-19 now fast disappearing, especially in Europe, with the emergence of the new variant, Omicron. Austria and Slovakia have recently announced return to full lockdown to at least to the middle of December even while restrictions are being further relaxed in places like New Zealand. The projection of the global economic growth has been downgraded, now expected to grow by 5.9% in 2021 and by 4.9% in 2022, by the IMF in its latest report. It reported that the downward revision for 2021 reflects a downgrade for advanced economies—in part due to supply disruptions—and for low-income developing countries, largely due to worsening pandemic dynamics.
For the full report, visit: ico.org.