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ICO REPORT – Coffee prices sharply higher on Brazil drought

LONDON –February 2014 has seen significant developments in the coffee market, with prices shooting upwards at a startling rate. The ICO composite daily price has increased from under 100 US cents/lb in November 2013 to a high of 176.37 on 11 March 2014.

This rally has been driven by a serious drought in Brazil, with several coffee growing regions receiving little or no rain in the critical development months of January and February.

This has engendered considerable concern around the size of the 2014/15 world coffee crop, which is now likely heading towards a deficit compared to demand.

However, despite these increases in prices , it must be kept in mind that coffee prices are currently at roughly the same level as November 2012, and thus still a long way from the highs of 2011.

Furthermore, the considerable volatility of prices exhibited by the market in recent months fails to benefit either coffee growers or consumers.

The monthly average of the ICO composite indicator price jumped by 24.4% in February compared to January 2014 to 137.81 US cents/lb, the largest monthly percentage increase since May 1997.

The daily price increased by over 50% between 30 January and 10 March, as the ongoing drought in Brazil and uncertainty over the 2014/15 crop put upward pressure on prices.

Arabica prices have been the primary beneficiary of this pressure, with the monthly averages of Colombian Milds, Other Milds and Brazilian Naturals all registering significant increases of 29.6%, 30.8% and 30.5%, respectively.

As a result, these prices are now at their highest level since the third quarter of 2012.

Robustas recorded a more modest increase, up 9.3% to 95.90 US cents/lb, their highest level since May 2013, reflecting the lower concern regarding Robusta supply.

Download the full report at this link.