Arabica gains to make up for Robusta losses in 2016/17: ICO

The International Coffee Organization’s (ICO) initial estimate of global coffee production in 2016/17 suggests that the world total w undefined

ill remain relatively stable, up 0.1 per cent to 151.6 million bags.

Arabica production is potentially set for a record level of 93.5 million bags with bumper crops expected from Brazil, Colombia and Honduras, the ICO said.

Prospects for Robusta supply, on the other hand, are less positive, with lower crops expected from most major origins.

The daily price of the ICO composite indicator steadied slightly after its collapse in November, ending the month of December two cents lower than it started on 130.92 US cents per pound.

The composite remained within a relatively narrow range, peaking at 135.04 cents and hitting a four-month low of 127.62 cents.

The Brazilian real also recovered after depreciating in November, but the possibility of a record crop in Brazil in 2016/17 put downward pressure on Arabica prices. Robusta prices, on the other hand, strengthened as heavy rains in Vietnam disrupted supply.

Total exports in November came to 9.9 million bags, 13.6 per cent higher than November 2015 due to larger volumes from Vietnam (estimated), Colombia and Indonesia.

Total exports for the first two months of coffee year 2016/17 are already 1.5 million bags higher than last year on 19.5 million, with total exports over the last 12 months reaching 117.6 million bags.

Output from Brazil, the largest producer, is expected to recover strongly following two years of drought, with total production in 2016/17 currently estimated at 55 million bags.

This recovery is expected in the Arabica crop, which is in the on-year of its biennial cycle. The Brazilian conilon (Robusta) crop remains affected by drought and is expected to be consumed by the domestic industry, leaving negligible export availability.

Production in Vietnam for 2015/16 has been revised up to 28.7 million bags by the ICO following the receipt of new export data, which would represent a record crop.

Prospects for 2016/17 are less positive, with drought at the beginning of calendar year 2016 likely affecting output, which is provisionally estimated down 11.3 per cent to 25.5 million bags.

Colombia continues its ongoing recovery; after declining to 7.7 million bags in 2011/12, output has since increased every year and is estimated up 3.5 per cent to 14.5 million bags.

Production in the first quarter of 2016/17 (October to December) is already 5.4 per cent higher than last year on 4.4 million bags.

Indonesia has also experienced adverse weather conditions for its 2016/17 crop, which is currently estimated down 18.8 per cent on 10 million bags, although this could yet be revised depending on export volumes. Furthermore, the vibrant domestic consumption market will reduce export availability.

Elsewhere, total production in Mexico and Central America is estimated up by 2.6 per cent to 17.4 million bags as Mexico is seen starting to recover from its outbreak of coffee leaf rust (up by 10.7 per cent to 3.1 million bags), with increases also expected in Honduras (up 2.9 per cent to a record 5.9 million bags), Guatemala (up by 2.3 per cent to 3.5 million) and El Salvador (up by12.9 per cent to 623,000 bags). Nicaragua is estimated slightly lower on 2.1 million bags (down 1.7 per cent) and Costa Rica on 1.5 million (down 9 per cent).

Finally, total production in Africa is estimated by the ICO to be up by 0.8 per cent to 16.4 million bags, despite a 1.7 per cent decrease from the region’s largest producer, Ethiopia, on 6.6 million bags. Increases are expected from Uganda (up 4.1 per cent to 3.8 million bags) and Côte d’Ivoire (up 5.7 per cent to 2 million bags), with Tanzania and Kenya down by 14 per cent (to 800,000 bags) and 0.7 per cent (to 783,000) respectively.

The ICO has also updated its consumption numbers, with final data now available for importing Members in coffee year 2015/16 (October to September).

This has resulted in a significant increase in the 2015/16 consumption figures, with higher than expected volumes from the European Union (up by nearly 600,000 bags compared to our previous estimate), USA (revised up by 841,000 bags) and Russian Federation (over 400,000 bags).

As a result, world consumption for 2015/16 has been revised up to 155.7 million bags (up 2.6 per cent on 2014/15). This represents a significant deficit compared to production of 151.4 million bags. However, it is possible that some of this change can be attributed to increases in pipeline stocks that are not officially recorded, rather than actual consumption, the ICO says.

It is therefore anticipated by the ICO that consumption in 2016/17 may show a statistical decrease as these stocks are absorbed into the market, despite overall growth in the market.

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