Coffee market settles lower amid strong global exports

After a slight rise in January following a three-month decline, the International Coffee Organization (ICO) composite indicator price declined by 1.2 per cent to an average of 114.19 US cents per pound in February 2018.

Indicator prices for all three Arabica groups fell in February 2018 while the indicator price for Robusta increased slightly by 0.7 per cent to an average of 89.24 US cents per pound. Exports of Robusta coffee are estimated up 48.2 per cent to 4.48 million bags in January 2018 and up 6.4 per cent to 14.87 million bags for the first four months of coffee year 2017/18.

This is largely due to increased shipments from Vietnam in January 2018, which are estimated at 3.29 million bags, nearly double the volume from a year earlier.

In the first four months of 2017/18, exports of Other Milds and Brazilian Naturals rose by 9.3 per cent to 7.62 million bags and 2.2 per cent to 13.31 million bags, respectively.

Export growth for Other Milds was led by increased shipments from Honduras while Ethiopia led the growth for exports of Brazilian Naturals.

In contrast, shipments of Colombian Milds during the same period fell by 10.9 per cent to 4.94 million bags as excessive rains in Colombia have led to decreased output.

The daily composite indicator was generally higher in the first half of the month, peaking at 116.07 US cents per pound on 14 February. The composite indicator reached a low of 112.16 US cents per pound on 21 February but remained above 113 US cents per pound after that date.

The decline in the monthly composite indicator was driven by the negative performance of the three Arabica groups, all of which lost value compared to their January levels.

More specifically, Colombian Milds fell by 1.6 per cent, Other Milds by 1.8 per cent, and Brazilian Naturals by 2.3 per cent.

Robustas, on the other hand, recorded moderate growth of 0.7 per cent compared to January.

The differential between Colombia Milds and Other Milds increased from an average of 4.96 US cents per pound in January 2018 to an average of 5.22 US cents per pound in February.

The average arbitrage in February, as measured on the New York and London futures markets, fell by 10.9 per cent to 43.44 US cents per pound. Additionally, intra-day volatility of the ICO composite indicator price decreased by 0.5 percentage points to 5.2 per cent.

Global coffee exports during January 2018 totalled 11.01 million bags, up 20.7 per cent compared to January 2017. The total volume exported between October 2017 and January 2018 amounted to 40.74 million bags as against 39.53 million bags for the same period in 2016/17, an increase of 3.1 per cent.

Arabica exports reached 25.87 million bags during the first four months of coffee year 2017/18, 1.3 per cent higher than the same period last year, while Robusta exports rose by 6.4 per cent to 14.87 million bags.

Production in Brazil, the world’s largest coffee producer, is estimated at 51.5 million bags in 2017/18, 6.4 per cent lower than in 2016/17. This is largely due to an estimated decline of 11.1 per cent to 40 million bags of its Arabica output while Robusta production is estimated 15 per cent higher at 11.5 million bags. However, beneficial weather and the upturn in its Arabica cycle are expected to improve the production outlook for 2018/19.

After a late start to harvesting, Vietnam’s exports in January 2018 rose to 3.29 million bags, nearly double the volume in the same month one year earlier, which largely accounts for the overall growth of 16.4 per cent to 8.96 million bags during the first four months of coffee year 2017/18. Vietnam is the largest producer of Robusta coffee, accounting for approximately 45 per cent of global Robusta output.

In 2017/18, Vietnam’s production is estimated to be 28.5 million bags, 11.6 per cent higher than 2016/17, but 0.8 per cent lower than in 2015/16.

Indonesia and India are also relatively large producers of Robusta, accounting for around 15 per cent and 6 per cent of global Robusta output, respectively.

Indonesia’s production in 2017/18 is estimated to fall by 6 per cent to 10.8 million bags.

India’s production is provisionally estimated 12.3 per cent higher at 5.84 million bags for 2017/18. Its shipments in the first four months of coffee year 2017/18 amounted to 1.91 million bags, expanding by 11.9 per cent compared to one year earlier

Source : GlobalCoffeeReport

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