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Robusta prices hit five-year high: ICO

Coffee farmer drying beansThe coffee market recovered in Jauary from the fall in prices, which was recorded towards the end of last year, according to the International Coffee Organization’s (ICO) monthly market report.

While a price increase could be observed across all groups, it was most notable for Robusta, the ICO said.

Exports for the first quarter of coffee year 2016/17 were 8.3 per cent higher than last year at 29.8 million bags.

Brazil’s coffee authority, Conab has released its first estimates of coffee production in Brazil for the upcoming crop year 2017/18, projecting a reduction of around 10 per cent in crop compared to the current year.

The ICO says that large export volumes and the high levels of stocks in consuming countries seem likely to put pressure on price levels.

The monthly average of the ICO composite indicator was up by 5.6 per cent to 139.07 US cents per pound in January, compared to 131.70 US cents per pound in December 2016.

Although the monthly average of the ICO composite price has significantly improved in January, it remains below the level of 145.82 US cents per pound recorded in November 2016. In view of the steady level of exports and news of more favourable weather conditions in Brazil, the positive trend reversed towards the end of January after the daily price peaked on 23 January at 144.54 US cents per pound.

The most pronounced price increase was for the Robusta group, which rose by 6.4 per cent to 108.32 US cents per pound, the highest monthly level since September 2011, the ICO said.

This increase can mainly be attributed to supply shortages stemming from a small conilon crop in Brazil and reduced crop forecasts for Vietnam and Indonesia.

Consequently, roasters increasingly substitute other Robusta origins or lower grade Arabica in blends, which unsurprisingly drives up prices of the Arabica groups with Colombian Milds, Other Milds and Brazilian Naturals up by 5.3 per cent, 4.2 per cent and 6.2 per cent, respectively. At the same time, the arbitrage between the London and New York futures markets has increased by 5.3 per cent from 49.38 US cents per pound to 52.00 US cents per pound.

Total exports in December 2016 came to 10.2 million bags, 7 per cent more than in the previous year, the ICO said. This brings exports for the first quarter of coffee year 2016/17 (October to December) to 29.8 million bags, up 8.3 per cent compared to the same period last year. Shipments of Arabica coffee were up by 8.5 per cent to 19.2 million.

The biggest increase was found in Other Milds, which were up by 23.3 per cent as result of higher exports from Honduras, Papua New Guinea and Peru. Exports of Colombian Milds remain on a growth path, with shipments up by 500,000 bags as Colombia’s production continues to recover to levels not seen since the 1990s. Brazilian Naturals increased by 3.7 per cent.

Meanwhile shipments of Robusta, on the other hand, are estimated to have increased by 7.9 per cent compared to last year, with exports from the two largest origins, Vietnam and Indonesia, estimated up by 16.1 per cent and 21.2 per cent respectively.

In terms of production, the first estimates recently published by Conab, the official Brazilian agency responsible for crop forecasts, indicate a total production between 43.65 and 47.5 million bags for crop year 2017/18. This would constitute a decrease compared to last year’s crop of between 8 per cent in the more optimistic scenario, and up to 15 per cent when a more conservative view is taken, the ICO said.

According to these estimates, Arabica and Robusta crops are projected to fall in a range of 35.01−37.89 million bags and 8.64−9.63 million bags respectively. Hence, Arabica production is provisionally down by between 13 per cent and 19 per cent, which has been attributed mainly to the fact that 2017/18 is an off-year in Brazil’s biennial production cycle as trees are recovering from a strong 2016/17 crop.

On the other hand, Robusta is expected to be up by between 8 per cent and 21 per cent, a significant recovery from last year’s low output. However, some independent sources indicate much higher figures for the total production of Brazil. Based on the latest information received from ICO member countries, total production in crop year 2016/17 is estimated at around 151.6 million bags.

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