LONDON, U.K. – The ICO composite indicator rose to a 17-month high in July, although the market struggled to hold on to its early gains. Coffee exports have slowed in the last couple of months, as the new Brazilian crop has not yet come to market, but consumer stocks remain relatively well supplied.
Furthermore, Conab released its survey of domestic private stocks as at the end of March 2016 as being just 5.4% lower than the previous year, down from 14.4 million to 13.6 million bags.
Coffee prices were mostly mixed over the course of July, with the daily price of the ICO composite indicator ending the month just 0.5 cents above where it started.
Prices initially increased to a high of 137.36 US cents/lb in the middle of the month, due to a second frost scare in Brazil and a slight recovery in the Brazilian real.
This was the highest daily value for the ICO composite since February 2015. However, prices then slipped to a low of 129.40, as the Colombian truckers’ strike was resolved and the threat of frost in Brazil receded.
Higher monthly averages were recorded in all four group indicator prices. Robustas saw the strongest growth, up 5.7% to 90.82 cents, their highest level since April 2015. Arabica prices also saw significant increases, with Colombian Milds, Other Milds and Brazilian Naturals up by 4.8%, 3.8% and 4.6% respectively.
Nevertheless, the arbitrage between Arabica and Robusta widened for the second consecutive month, despite their respective supply prospects.
Coffee exports were significantly lower in June 2016 compared to last year, down 11.2% to 9 million bags, which would represent the lowest June exports in six years.
Lower shipments were estimated from three of the four largest producers: Brazil (-10.2%), Colombia (-7.4%) and Indonesia (-62.9%), although Vietnam (+0.4%) was slightly higher.
Nevertheless, total exports for the first three quarters of coffee year 2015/16 (October to June) are estimated 0.2% higher than the same period last year, on 85.1 million bags, with a 6.5% decrease in Robusta exports offset by a 4.6% increase in Arabica
The ICO production estimate for crop year 2015/16 has been revised down to 143.3 million bags, compared to our previous estimate of 144.7 million.
This is mostly due to a sharp reduction in output from Mexico, revised down from 3.9 million bags to 2.8 million, and a more modest revision for Nicaragua to 1.8 million bags.
In the case of Mexico, this is attributed to the more severe than anticipated impact of coffee leaf rust, which has aggressively reduced output by more than a third since 2012/13.
As a result, total production for 2015/16 is expected to be 0.7% higher than last year, though still lower than 2012/13 and 2013/14.
Total production of Arabicas is mostly unchanged; indeed, the supply of Washed Arabicas used by the specialty coffee sector has been stable over the last four years, with decreases in some origins (for example Mexico and Peru), compensated by increases in others (most importantly Colombia and Honduras).
Robusta supply has been less stable. 2015/16 is expected to grow by 1.7% due to improved crops in Vietnam and Indonesia, but the outlook for 2016/17 is less positive.
Exports by Indonesia over the last three months have dropped by over a third to under 1 million bags, affected by a strong El Niño and increasing domestic demand, while the Vietnam Coffee and Cocoa Association (Vicofa) has warned of lower supply next year due to drought.
Finally, the Brazilian Robusta crop is estimated by Conab as the lowest in over ten years due to dry weather, with June’s Robusta exports down 79.5% to just 83,000 bags.
Read the PDF version of the report at this link.