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Coffee market price ends 2017 at 21-month low

From the January 2018 issue.

Beans into cupIn December 2017, the International Coffee Organization (ICO) composite indicator price averaged 114 US cents per pound, which is the lowest level since February 2016, when it was 111.75 US cents per pound.

The indicator price started the month at 117.30 US cents per pound and then fell to a minimum of 110.48 US cents per pound on 12 December. On the last day of the month, the indicator price reached 115.88 US cents per pound.

Prices for all group indicators fell in December 2017 with Robusta experiencing the steepest decline and Colombia Milds, the smallest. The monthly average for the Robusta group decreased by 4.1 per cent. The average prices for Colombian Milds, Other Milds and Brazilian Naturals were down 1.7 per cent, 2.5 per cent and 2.3 per cent, respectively. The average arbitrage in December, as measured on the New York and London futures markets, decreased by 3.2 per cent to 46.95 US cents per pound. Meanwhile intra-day volatility of the ICO composite indicator price declined by 0.2 percentage points to 5.2 per cent, which is the fifth consecutive month of decrease.

Total shipments in November 2017 came to 9.02 million bags, less than the 9.93 million bags exported in the same month of the previous year.

Compared to one year ago, shipments of both Arabica and Robusta declined in November 2017 to 6.06 million bags and 2.96 million bags, respectively. Total exports for the first two months of coffee year 2017/18 were 11.3 per cent lower than in the previous year at 17.62 million bags.

World coffee production in 2017/18 is provisionally estimated at around 158.78 million bags, which represents an increase of 0.7 per cent compared to 2016/17, which has been revised up to 157.69 million bags.

Total production of Arabica is estimated to decrease by 1.1 per cent to 97.32 million bags compared to 98.42 million bags last year, as lower production of Colombian Milds and Brazilian Naturals are only partially offset by increases in Other Milds.

An increase of 3.7 per cent is expected in Robustas, due largely to a rebound in Vietnam, the world’s largest Robusta producer.

After reaching 55 million bags in 2016/17, Brazil’s output is estimated to decline to 51.5 million bags in 2017/18. Compared to crop year 2016/17, production of Arabica decreased by 6.4 per cent to 38.63 million bags. In addition to the expected biennial downturn of the Arabica crop, smaller bean sizes and an outbreak of the coffee berry borer also contributed to the decline in production.

Brazil exported 2.79 million bags of coffee in November 2017, 15 per cent lower than one year ago. Its shipments in the first two months of coffee year 2017/18 are estimated at 5.66 million bags, a decrease of 14.7 per cent compared to one year ago. 

In 2016/17, Vietnam’s production declined by 11.1 per cent to 25.54 million bags due to overly hot and dry weather. However, output in Vietnam is provisionally estimated to increase to 28.5 million bags in crop year 2017/18, 11.6 per cent higher than in the previous year. Sufficient rainfall for crop year 2017/18 is expected to improve nutrient uptake and increase yields. Exports during the first two months of crop year 2017/18 are estimated at 3.08 million bags, down 19.4 per cent from one year ago as excessive rains have delayed harvesting of the new crop.

After increasing over the last five crop years, production in Colombia is provisionally estimated to decrease by 4.3 per cent to 14 million bags as heavy rains caused damage during the flowering of the trees.

In the last few crop years, Colombia’s output has expanded due to replanted coffee trees coming into production and beneficial weather. Shipments from Colombia are estimated at 2.29 million bags for the period October to November 2017, 10.5 per cent lower than the same period one year ago.

In Indonesia, a decrease in production of 6 per cent to 10.8 million bags is provisionally expected in crop year 2017/18 due to lack of good farm management and excessive rains.

On the other hand, output in Honduras is expected to rise by 12 per cent to 8.35 million bags, which would be the fourth consecutive season of growth. Indonesia’s exports in October-November 2017 are estimated down 41.6 per cent to 0.96 million bags compared to last year while Honduras’s shipments during the same period increased by 1.7 per cent to 0.22 million bags.

The Coffee Board of India has indicated that it expects production to increase by 12.3 per cent to 5.84 million bags due to beneficial rains during the fruit setting period as well as an expected increase as Arabica production enters its on‐year in the biennial cycle. Smaller increases are expected provisionally in Ethiopia, Uganda, Peru and Mexico.

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