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Ico Report: world coffee production to decrease in 2019/20, small deficit expected


LONDON, UK — World coffee production in coffee year 2019/20 is projected 0.9% lower at 167.4 million bags with a 2.7% decline in Arabica output to 95.68 million bags, while Robusta production is expected to rise by 1.5% to 71.72 million bags. South America’s production is expected to fall by 3.2% to 78.08 million bags, due largely to the decline in Brazil’s Arabica output in its off-year of the biennial crop cycle.

Production from Asia & Oceania is projected to grow by 1.9% to 49.58 million bags due largely to a recovery in Indonesia’s output while Viet Nam is expected to remain stable.

Central America & Mexico could see an increase of 0.9% to 21.54 million bags while Africa’s output is estimated to decline by 0.6% to 18.2 million bags. World coffee consumption growth is likely to slow in 2019/20 in line with the slower growth expected for the global economy, and demand is projected to increase by 1.5% to 167.9 million bags.

The ICO composite indicator edged downward in October 2019 to 97.35 US cents/lb, decreasing 0.4% from September 2019. It ranged between 93.63 US cents/lb and 101.56 US cents/lb, exceeding 100 US cents/lb only on 1, 3, and 31 October. The market is currently well-supplied as Brazil has completed the harvest of its 2019/20 off-year crop, which fills the gap before the output from the October-September producers reaches the market.

Prices for all group indicators, except Colombian Milds, fell in October 2019. Colombian Milds rose by 0.1% to 132.09 US cents/lb while Other Milds fell by 1.5% to 126.99. As a result, the differential between Colombia Milds and Other Milds increased by 69.4% to 5.10 US cents/lb.

The last time the differential had exceeded this was in February 2018 when it reached 5.22 US cents/lb. Brazilian Naturals fell by 0.6% to 98.10 US cents/lb while Robustas decreased to 68.63 US cents/lb, 2.8% lower than in September 2019.

Arbitrage between Arabica and Robusta coffees, as measured on the New York and London futures markets, increased by 3.7% to 44.07 US cents/lb. The New York futures market decreased by 0.4% to 102.41 US cents/lb while the London futures market experienced a steeper decline of 3.3% to 58.34 US cents/lb.

The volatility of the ICO composite indicator price fell by just 0.1 percentage points to 6.2% over the last 30 days. The volatility for Colombian Milds and Other Milds remained unchanged from last month at 6.0% and 6.1%, respectively.

Brazilian Naturals volatility decreased by 0.1 percentage points to 8.1%, and the volatility for Robustas, which accounts for 37% of the composite indicator price, decreased by 1 percentage point to 5.2%

Global exports in September 2019 declined by 3.1% to 9.29 million bags. Robusta shipments fell by 12.9% to 3.02 million bags, and Colombian Milds decreased by 8.5% to 1.08 million bags. However, exports of Other Milds increased by 5% to 1.98 million bags while Brazilian Naturals grew by 5.2% to 3.21 million bags.

Despite the fall in September shipments, total exports for coffee year 2018/19 reached a new record of 129.43 million bags, 8.1% higher than in 2017/18. Shipments of both Arabica and Robusta increased in 2018/19, by 12.3% to 85.01 million bags and 0.9% to 44.43 million bags, respectively.

World production in coffee year 2018/19 is estimated at 169 million bags, which is 5.4% greater than in 2017/18. Production of Robusta increased 11% in 2018/19 to 70.67 million bags. Arabica production rose by 1.7% to 98.33 million bags, as declines from Honduras, Mexico and Peru offset the increase from Brazil.

Not only did Brazil’s Arabica output increase, but its Robusta production also expanded for the second consecutive year following a downturn in 2016/17. This increase led the growth in South America’s production, which rose by 8.1% to 80.69 million bags in 2018/19. Output in Central America & Mexico declined by 1.7% to 21.35 million bags. However, production in Africa and Asia & Oceania increased by 5.3% to 18.30 million bags and 4.4% to 48.66 million bags, respectively.

World Coffee Production in 2019/20

World production in coffee year 2019/20 is projected to fall by 0.9% to 167.4 million bags. While Robusta output is projected to rise by 1.5% to 71.72 million bags, Arabica output is anticipated to decrease 2.7% to 95.68 million bags. The decline in Arabica production is largely due to Brazil as its 2019/20 crop is in the off-year of its biennial cycle. As a result of this downturn, production in South America could decrease by 3.2% to 78.08 million bags. Output from Colombia is estimated to increase by 1% to 14 million bags, slightly higher than the volume produced in the last two years.

Output from Asia & Oceania is estimated to rise by 1.9% to 49.58 million bags. Viet Nam’s output is anticipated to remain stable at 31.2 million bags in 2019/20. Indonesia’s production declined by 13.2% in crop year 2018/19, but is projected to recover by 16.8% to 11 million bags in 2019/20. India may experience another fall in production in 2019/20 due to unfavourable weather, reaching 5.31 million bags, which is 0.3% lower than in 2018/19 and the third consecutive year of decrease.

Central America & Mexico’s harvest is projected to grow by 0.9% to 21.54 million bags. Production from Honduras is projected to decrease by 0.4% to 7.3 million bags while Mexico’s output could increase by 1.1% to 4.4 million bags. After a decline of 134,000 bags in 2018/19 due to unfavourable weather, production from Costa Rica is projected to rise by 8.6% to 1.55 million bags.

Africa’s output is projected to decline by 0.6% to 18.2 million bags. Increases in production from Ethiopia of 1.2% to 7.55 million bags and from Uganda of 1% to 4.75 million bags will likely be offset by declines from other African producers. Côte d’Ivoire’s output is projected to decrease by 4.1% to 2 million bags, following an increase of 41.6% to 2.09 million bags in 2018/19. Tanzania could see a decrease of 17.9% to 924,000 bags in 2019/20 as its Arabica crop enters an off-year.

Compared to an average annual rate of 2.1% in the previous 10 years, growth in global consumption in 2018/19 and 2019/20 is estimated to be slower. World consumption in 2018/19 grew 1.7% to 165.35 million bags, and in 2019/20, it is expected to rise by 1.5% to 167.9 million bags.

Global coffee demand is expected to be affected by a slowdown in global economic growth, particularly for emerging markets and developing economies, as described by the International Monetary Fund in its October 2019 World Economic Outlook.

In 2019/20, coffee demand in Asia & Oceania is projected to grow by 3% to 37.84 million bags, and in North America by 1.7% to 30.97 million bags. Africa’s demand for coffee is estimated to grow by 1.8% to 11.94 million bags, and Central America & Mexico’s demand by 1.4% to 5.47 million bags and Europe’s by 1.2% to 54.54 million bags. However, consumption in South America is likely to remain stable at 27.14 million bags in 2019/20.