LONDON, UK – In March 2020, prices for all Arabica group indicators increased due to concerns over the availability of that type of coffee while Robusta prices fell by 0.9% to 67.46 US cents/lb, says Ico,s monthly report. The ICO composite indicator reversed its downward trend, rising by 6.9% to 109.05 US cents/lb.
Global exports in February 2020 totalled 11.11 million bags, compared with 10.83 million bags in February 2019, but shipments in the first five months of coffee year 2019/20 decreased by 3.4% to 50.97 million bags. In 2019/20, world coffee consumption is estimated at 169.34 million bags, 0.7% higher than in 2018/19 as Covid-19 presents considerable downside risk to global coffee consumption.
Currently demand is estimated to exceed production, projected at 168.86 million bags, by 0.47 million bags in coffee year 2019/20. However, the situation is evolving quickly and impacting both supply and demand.
The Secretariat is closely monitoring the situation and will keep its Members and the wider coffee sector informed as new information and analysis becomes available.
After two months of decrease, the ICO composite indicator rose in March, averaging 109.05 US cents/lb, 6.9% higher than in February. This is the second highest monthly average in coffee year 2019/20.
The daily price of the ICO Composite ranged between 103.22 US cents/lb on 17 March and 117.41 US cents/lb on 25 March. Concerns over disruptions to the supply chain – as March is usually a month of lower stock on-hand in countries with crop years commencing in April, particularly Brazil – pushed prices higher.
Prices for all Arabica group indicators rose in March 2020, while Robusta prices fell by 0.9% to 67.46 US cents/lb. Brazilian Naturals increased by 10% to 112.87 US cents/lb, Other Milds by 9.5% to 148.33 US cents/lb and Colombian Milds by 8.6% to 158.99 US cents/lb.
The differential between Colombian Milds and Other Milds narrowed in March 2020, by 2.5% to 10.66 US cents/lb, after more than doubling in February 2020. Uncertainty about the immediate availability of washed Arabica kept prices firm for the Arabica group indicators.
The New York Arabica futures market rose by 8.8% to an average of 116.09 US cents/lb in March 2020, while the London Robusta futures market declined by 2.8% to 57.39 US cents/lb. As a result, the spread between Arabica and Robusta coffees, as measured on the New York and London futures markets, increased to 58.70 US cents/lb, which is 11.03 US cents/lb higher than in February. Certified Arabica stocks decreased by 6.1% month-on-month to 2.29 million bags in March 2020.
The volatility of the ICO composite indicator increased by 1.8 percentage points to 9.6% over the past month. The volatility of all Arabica indicators grew in March 2020. Other Milds rose by 3.5 percentage points to 11.5%, Brazilian Naturals by 2.6 percentage points to 13.1% and Colombian Milds by 2 percentage points to 10.5%. The Robusta group indicator volatility was 4.5%, a decrease of 2.3 percentage points from February 2020
Global exports in February 2020 totalled 11.11 million bags, compared with 10.83 million in February 2019. Exports in the first five months of coffee year 2019/20 have decreased by 3.4% to 50.97 million bags compared to 52.78 million bags for the same period in 2018/19. Exports of Arabica decreased by 7.8% to 31.86 million bags in October 2019 through February 2020 while Robusta shipments increased by 4.8% to 19.1 million bags.
In February 2020, exports from Brazil decreased by 24.3% to 2.7 million bags compared to February 2019. Its shipments from October 2019 through February 2020 fell by 13.2% to 16.19 million bags compared to the same period in 2018/19. In 2019/20, Brazil’s crop is estimated at 57 million bags, 12.2% lower than 2018/19. Arabica production, which typically accounts for around 65-70% of its total crop, is in the off-year of its biennial cycle for 2019/20.
leading to the downturn in total output this crop year. Typically harvesting of its new Robusta crop commences in April with Arabica activity beginning in June. However, delays may occur due to the spread of coronavirus making it more difficult to hire and manage labour for harvesting and transportation. This could result in lower shipments in the short-term, particularly since stocks are relatively low at the end of its 2019/20 crop year.
Viet Nam’s exports in February 2020 rose by 51.4% to 2.8 million bags, though this compared with an exceptionally low volume in February 2019. Further, Viet Nam’s exports in the first five months of the coffee year, however, are down 4.1% at 11.15 million bags. Since the start of the coffee year in October 2019, Robusta prices have fallen each month, except in November 2019, making it likely that farmers in Viet Nam are holding on to their coffee until prices rise. From 1 April, the Government of Viet Nam has implemented a social distancing policy to curb transmission of coronavirus. This is unlikely to have a large impact on production, estimated 4.4% higher at 31.2 million bags, as harvesting is mostly complete. However, this could impact shipments in the near-term.
In February 2020, shipments from Colombia declined by 13.4% to 1.08 million bags compared to February 2019. Its exports in the first five months of coffee year 2019/20 are 1.6% lower at 5.9 million bags. Production for Colombia is estimated 1.7% higher at 14.1 million bags in 2019/20.
According to the National Federation of Coffee Growers of Colombia, 6.6 million bags were harvested through February, which is 8.8% higher than in the same period one year ago due to strong growth at the start of the season. There have been reports about lower availability of shipping containers passing through Colombia from China, which may have impacted exports in February.
Additionally, its output was reported 9.5% lower at just over 1 million bags in February 2020 compared to February 2019. A country-wide 19-day lockdown was announced by Colombia’s president from 25 March to slow the spread of coronavirus. Colombia’s second Mitaca crop typically begins harvesting in April, which is likely to be impacted by the containment measures as well as fewer migrant labourers available from neighbouring countries.
Indonesia’s exports in February 2020 were 80.2% higher than one year ago, reaching 876,000 bags. Its shipments from October 2019 through February 2020 are 84.7% higher at 2.87 million bags. However, this follows exceptionally low volumes last year, when production fell by 13.2% to 9.42 million bags, the lowest output since 2011/12. Indonesian production is estimated 16.8% higher at 11 million bags in crop year 2019/20. At present, it is difficult to foresee how harvesting of the Robusta crop as well as exports may also be affected by Indonesia’s policies related to the COVID-19 pandemic.
In February 2020, exports from Honduras declined by 2.8% to around 800,000 bags. Its shipments in the first five months of coffee year 2019/20 are estimated 1.6% higher at 2.04 million bags.
Production in 2019/20 is estimated at 7.3 million bags, similar to the output in 2018/19, but 3.4% lower than the record volume of 7.56 million bags in 2017/18. Low prices have already had a negative impact on production in Honduras, but a nationwide curfew has been imposed since 20 March, which will have a negative impact on shipments.
Harvesting for 2019/20 has already been completed by this time and will not begin again until much later in the year. In the near term, exports of coffee, particularly if there is a lower availability of shipping containers or fewer workers at ports, may be reduced.
In 2019/20, world coffee consumption is estimated at 169.34 million bags, 0.7% higher than in 2018/19 as Covid-19 presents considerable downside risk to global coffee consumption.
Currently demand is estimated to exceed production, estimated at 168.86 million bags, by 0.47 million bags in 2019/20. However, the situation is evolving quickly impacting both supply and demand. On one hand, coffee consumption may contract as a result of the containment measures against the spread of coronavirus, particularly for out-of-home consumption
Additionally, global economic growth in 2019 is expected to be much lower than initially forecast, accompanied by rising unemployment rates, further reducing demand and putting downward pressure on prices. On the other hand, disruptions to the supply chain both in shipping and harvesting could lead to temporary shortages in the supply, putting upward pressure on prices in the short term.