The monthly average of the International Coffee Organization’s (ICO) composite indicator price decreased significantly in April compared to March, down 2.7 per cent to 130.39 US cents per pound, according to the ICO’s monthly report. After gaining slightly in the first half of April, daily prices started to decline sharply on 20 April, dropping to a low of 122.25 US cents per pound on 27 April. At month-end, daily prices were 6.9 per cent lower than at the beginning of April. All three Arabica groups fell significantly, but the sharpest decline was recorded for Other Milds, which were down by 3 per cent compared to the previous month, the ICO found. The average prices for Colombian Milds and Brazilan Naturals were 2.2 per cent and 2.6 per cent lower, respectively. The differential between Colombian Milds and Other Milds, which has been consistently negative for more than three years, has reached the narrowest gap in 26 months, down to -0.43 US cents per pound. The prices for Robustas showed a similar decline and were 3 per cent lower reaching a monthly average of 103.58 US cents per pound, according to the report. The Arabica/Robusta arbitrage, as measured on the New York and London futures markets, dropped by 1 per cent to 43.92 US cents per pound, the lowest level since January 2014. The sudden fall in prices in the second half of April is mainly the result of intensive activities of hedge funds selling off long positions, which had been building up over the past months, the ICO said. This comes against the backdrop of an increasingly positive outlook for sufficient supply of coffee on the world market. The report stated that the combination of very high exports and growing inventories in consuming countries helped to overcome initial supply concerns. Like in the case of other agricultural commodities, the coffee market is experiencing downward pressure. This development is part of a broader decrease of prices in view of supply expectations for agricultural and non-agricultural commodities, the ICO reported. Cumulative total exports in the first half of coffee year 2016/17 (October to March) amounted to 60 million bags, up 4.8 per cent compared to last year. A drop in exports of Brazilian Naturals by 2.4 per cent was offset by significantly higher shipments of Colombian Milds and Other Milds. For example, Colombia has successfully recovered from the coffee leaf rust crisis and increased production to levels last seen in the first half of the 1990s. The country exported 10.3 per cent larger volumes in the first six months of coffee year 2016/17. Shipments of Arabica coffees from origins in the Other Milds group are 16.6 per cent higher than in the same period of the previous year. These very high export volumes have ensured that consumer stocks are well supplied. At the end of December 2016, stocks of green coffee in importing countries reached 23.5 million bags, compared to 23 million in December 2015. In the first quarter of 2017, the inventories have further increased, reaching record levels in some countries. For example, the ICO found that March inventories in the United States climbed to 6.7 million bags, the highest level since 1994. The supply outlook for 2017/18 seems increasingly positive. Initial concerns about frost in Brazil and a shortage of rainfall in Vietnam affecting the 2017/18 crops have eased. However, given low stock levels in Brazil, any adverse weather events in the coming months would pose a risk to future supply from that country, the ICO said. Similarly, the threat of an outbreak of coffee leaf rust in smaller producing countries such as Honduras adds uncertainty.