Thursday 20 June 2024
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Ico Report: Coffee prices rallied in April amid an anticipated decline in world production

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LONDON, UK — In April 2021, the ICO composite indicator rose by 1.4% to 122.03 US cents/lb as coffee prices for all group indicators increased, shows data from the Organization’s latest report. Over the last six months, coffee prices have recorded a steady increase in monthly averages despite a few daily slumps. Relatively firm prices seem to encourage sales as world coffee exports amounted to 11.9 million 60-kg bags in March 2021, 2.4% higher than in March 2020.

Shipments in the first half of coffee year 2020/21 increased by 3.5% to 65.4 million bags compared to 63.2 million bags recorded over the same period in coffee year 2019/20. However, cumulative exports from April 2020 to March 2021 are provisionally estimated at 129.5 million bags, a 1% decrease compared with the 130.8 million bags recorded from April 2019 to March 2020. World consumption for coffee year 2020/21 is projected at 166.3 million bags, an increase of 1.3% on its level of 164.2 million bags in coffee year 2019/20.

The ICO has revised its production estimate for the current coffee year downwards, owing to Brazil’s smaller 2021/22 Arabica crop. Despite this, world consumption is forecast to remain at 2% below total production of 169.6 million bags in coffee year 2020/21.

Coffee prices continued their upward trend as the monthly average of the ICO composite indicator rose to 122.03 US cents/lb in April 2021

1.4% higher than in March 2021 and 12% higher than in April 2020. This level also represents the sixth consecutive month of increase and the highest monthly average in over three and a half years. In April 2021, the daily composite indicator fluctuated between 114.22 and 130.87 US cents/lb.

The linear trend has gotten steeper every consecutive month since the start of the coffee year in October 2020. Market fundamentals are one of the main drivers of the current price trends as the imbalance between consumption and total production is getting smaller.

Arabica supplies are expected to tighten in the near future, with Brazil’s production projected to decline by more than 30% in its 2021/22 off-year crop. Moreover, various restrictions due to the ongoing pandemic affecting particularly the movement of population are expected to be gradually eased in the near future.


Average coffee prices for all group indicators increased in April 2021

Coffee prices for Colombian Milds and Brazilian Naturals confirmed their steady upwards trends since October 2020. Colombia Milds rose by 2.4% to 181.70 US cents/lb and the average price for the Brazilian naturals increased by 1.7% to 124.18 US cents/lb.

After slipping in November 2020, the average price for Other Milds regained its upward trend and an increase of 1% was observed in April 2021 to 168.65 US cents/lb against 167.05 US cents/lb in March 2021. The differential between Colombian Milds and Other Milds increased by 25% to 13.05 US cents/lb and the differential between Other Milds and Brazilian Naturals decreased by 0.9%. As for the Robusta group, mixed price movements have been observed since October 2020.

However, an increase of 0.8% to 74.47 US cents/lb was recorded in April 2021 in comparison with 73.86 US cents/lb in March 2021. Nevertheless, this monthly average price for Robusta is 16% higher than the level of 63.97 US cents/lb recorded in April 2020. The differential between Colombian Milds and Robusta increased by 3.5% to 107.23 US cents/lb.

In April 2021, the arbitrage between Arabica and Robusta coffees, as measured on the New York and London futures markets, increased by 4.7% to 71.01 US cents/lb.

Intra-day volatility of the ICO composite indicator price decreased from 7.7% in March 2021 to 7.3% in April. The volatility for all indicators decreased in April, with Robusta experiencing the highest decrease of 1.1%. While the volatility of the London Futures market has decreased by 1.5% to 7% in April 2021, it has remained unchanged in the New York Futures market at 9.3%, the same level recorded in March 2021.

In April 2021, certified stocks of Arabica for New York Futures exchange were 2.07 million bags and certified stocks of Robusta coffee for the London Futures Exchange were 2.53 million bags, representing an increase by 5% and 1% respectively.

Total production in coffee year 2020/21 is estimated to rise by 0.5% to 169.63 million bags

With Arabica production increasing by 2.6% to 99.42 million bags. The production of Robusta coffee is expected to decrease by 2.4% to 70.21 million bags. At the regional level, a slight decrease of 0.8% is expected for Africa at 18.54 million bags in coffee year 2020/21 in comparison with 18.68 million bags in the previous coffee year.

Production for Asia & Oceania is forecast to fall by 1.1% from 49.48 million bags in 2019/20 to 48.95 million in 2020/21. Production for Mexico & Central America is expected to decrease slightly by 0.1% at 19.54 million bags against 19.56 million bags in coffee year 2019/20. An increase of 1.8% in production is expected from South America at 82.59 million bags, compared with 81.12 million bags in 2019/20.

World coffee consumption is projected to increase by 1.3% to 166.34 million bags in 2020/21 compared to 164.20 million bags for coffee year 2019/20

The negative impact on coffee consumption experienced during coffee year 2019/20 with the outbreak of the covid-19 pandemic is fading as consumption is regaining its normal trend.

Consumption in importing countries and domestic consumption in exporting countries is expected to grow by 1.3% and 1.4% respectively. Consumption in Africa is expected to increase by 1.8% at 12.24 million bags. Consumption in Asia & Oceania will increase by 1.4% at 36.50 million bags.

In the region of Mexico and Central America, consumption is expected to increase by 0.7% at 5.36 million bags. As a result, the surplus of total production over world consumption is expected to be reduced at 3.28 million bags, compared with 4.6 million bags in the previous coffee year.

Global exports in March 2021 totalled 11.94 million bags, compared with 11.66 million bags in March 2020

Exports in the first half of coffee year 2020/21 reached 65.4 million bags, representing an increase of 3.5% compared to 63.2 million bags during the same period in coffee year 2019/20.

Cumulative exports of Colombian Milds over the first half of coffee year 2020/21 increased by 2.6% to 7.75 million bags, while exports of Other Milds decreased by 8.3% to 10.4 million bags from 11.35 million bags in 2019/20. Total exports of Brazilian Naturals increased by 19.2% to 23.66 million bags, compared to 19.84 million bags recorded over the first six months of coffee year 2019/20. Shipments of Robusta over half of coffee year 2020/21 fell by 3.5% to 23.59 million bags.

The increase in exports was primarily driven by shipments of green coffee, which rose 4.3% to 59.32 million bags in the first half of the coffee year compared to the same period in the previous year. Exports of roasted coffee fell by an estimated 4% to 336,172 bags, while those of soluble coffee fell by 3.4% to 5.72 million bags.

In regional terms, exports of all forms of coffee from Africa in the first half of coffee year 2020/21 decreased by 8.9% to 5.96 million bags, as shipments from Ethiopia, Côte d’Ivoire and Kenya declined by 28.5%, 49% and 9.5% respectively. Uganda, the largest regional exporter, has recorded an increase of 11.5% to 2.8 million bags. It should be noted that in March 2021, exports of Uganda totalled 572,839 bags, its highest volume of exports in a single month, generating over USD 53.55 million in export value.

Asia & Oceania’s coffee exports declined by 6.3% to 19.3 million bags in October 2020 to March 2021. Viet Nam’s exports during this period declined by 13.2% to 12.58 million bags, while Indonesia’s shipments increased by 20.2% to 3.7 million bags. Exports from India, the region’s third largest producer, recorded a small decrease of 0.5% to 2.55 million bags compared to 2.56 million bags in 2019/20.

Compared to the first six months of coffee year 2019/20, exports from Mexico & Central America fell by 12.2% to 6.06 million bags as parts of the region have not yet recovered from the severe impact of hurricanes Iota and Eta.

Notably, shipments from Honduras, the region’s largest producer, decreased by 20.9% to 2.19 million bags while those from Nicaragua fell by 12.7% to 1.05 million bags. Guatemala’s exports declined by 15.9% to 1.05 million bags.

Total exports of Costa Rica and El Salvador also declined by 7.2% and 28.2%, respectively. Indications of a recovery have nevertheless been observed in recent months, particularly in Honduras which exported 807,506 bags of coffee in March 2021, an increase of 4.5% compared to March 2020.

From October 2020 to March 2021, South America’s exports increased by 17% to 33.74 million bags. During this period, exports of all forms of coffee from Brazil rose by 23.3% to 24.66 million bags. Brazil is nearing the end of its 2020/21 crop year, which was an on-year for its Arabica production. Exports from Colombia increased by 3.5% to 7.09 million bags. Ecuador recorded a relatively stable level of its exports at 1.75 million bags.


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