MILAN — Skyrocketing coffee prices and high volatility: ICO’s monthly report shows how coffee prices soared in February, peaking around the middle of the month, only to fall to lows in the last day of the month. The monthly average of the ICO Composite Indicator Price hit a new nominal all-time high of 354.32 cents per pound last month, a 94.6% increase over February 2024.
This time changes were much more pronounced on the Arabica side. In fact, the Brazilian Naturals indicator rose by 18.3% to 401.10 cents: more than double the value of a year ago (186.74 cents per pound).
Colombian Milds and Other Milds gained, in turn, 16.7% and 15.5%. New York recorded an 18% increase to 388.18 cents. Importantly, this indicator – calculated by taking the average of the second and third positions – was well below the front month price, reflecting the backwardation curve.
Robusta coffee prices recorded single digit increases. The monthly average for the Robusta indicator rose to a record-high of 263.08 cents: roughly the value reached by the monthly average of Colombian Milds in August 2024.
London gained 8.2% and stood at 253.48 cents, not far from the value of the New York indicator in September (254.43 cents).
The ICO Composite Indicator Price reached its daily peak on 13 February, with a value of 375 cents.
The second half of the month, however, saw a predominantly downward trend in coffee prices, with the indicator reaching a monthly low of 337.54 cents on 28 February.
What explains this decline, which was followed by a partial recovery in the first few days of March?
The report suggests two possible explanations.
- On 10 February, ICE updated its margin requirements upwards by as much as US$3,046 for Arabica contracts expiring March 2027. There is a possibility that this resulted in some of the traders liquidating their positions because of increased operating costs.
- Falling business and consumer survey results for February 2025 in the USA (released on 7 and 21 February 2025) and EU (released on 21 February 2025) introduced negative sentiment to consumer confidence in these key destination markets.
These factors could have triggered a profit-taking, leading to a price retreat, says the report. This appears to have been sustained by the following:
- Cash flow: the required liquidity and the need for more trade credits increase the cost and risk of doing business. Consequently, this can cause banks to be reluctant to provide more liquidity, restricting the purchasing power of traders to buy from origins and thereby limiting inventory carry, reducing demand and lowering differentials. This can be seen through the onset effects of the bankruptcies of Atlântica Exportação e Importação SA and Cafebras Comércio de Cafés do Brasil SA.
- The introduction of market uncertainties due to the USA announcing increases in tariffs.
- Improved outlook in supply: preliminary crop estimates for the 2024/25 Vietnam harvest appears to have been positive, thereby alleviating some of the concerns over potential structural supply shortfalls. On 12 February, the Mercantile Exchange of Vietnam (MXV) forecasted a significant recovery in Vietnam’s coffee production for coffee year 2024/25, with an expected 10% increase compared to 2024, reaching 1.65 to 1.75 million tonnes (equivalent to 28 to 29 million 60-kg bags).
- Favourable weather: according to information released on 13 February from the National Weather Service of the US National Centers for Environmental Prediction, La Niña is expected to replace the strong El Niño of 2024. Reports of good weather conditions feed through the market, relieving fears of long-term structural undersupply and subsequently lowering pressure on prices.
Exports, meanwhile, slowed down. In January, world exports of all forms of coffee fell by 13.3% to 10.826 million bags, compared with 12.488 million in the same month last year.
On the Arabica front, the decline was moderate overall (-2.5%) at 6.665 million: just 171 thousand bags less. This was due to the considerable resilience of Brazilian Naturals exports, which fell by only 0.7% to 3.854 million.
Shipments of Colombian Milds recovered slightly (+4.3%) to 1.107 million, while those of Other Milds were 10% down to 1.704 million. Robusta volumes fell by more than a quarter (-26.4%) to 4.16 million.
Exports in the first four months of coffee year 2024/25 fell by 4.9%, to 42.791 million. Arabica exports were higher on-year (+2.7%), at 27.658 million.
Shipments of Brazilian Naturals grew to 16.343 million (+3%); those of Colombian Milds amounted to 5.14 million (+17.7%). On the other hand, Other Milds saw a 7.9% decrease to 6.176 million.
Finally, Robusta exports fell significantly, to 15.133 million (-16.3%).
