Coffee prices fall to lowest level since Sept 2009: ICO

Coffee prices fell sharply in June 2013 as market fundamentals, combined with an uncertain macroeconomic outlook, drove the International Coffee Organisation’s (ICO) composite indicator price to its lowest level since September 2009. The monthly average of the ICO composite indicator price fell to 117.58US cents per pound, a drop of 7.4 per cent from last month. The market remains well supplied with coffee, with total exports for the first eight months of coffee year 2012-13 (October to May) reaching 75.7 million bags, compared with 72 million in the same period last year, According to the ICO’s monthly report. Commodity prices in general declined over the course of the month, mostly due to negative economic news from China and the United States, the ICO said. The report states that given current price trends, there is a diminishing incentive for farmers to invest in their crops, and the use of inputs such as fertilisers and labour will likely be reduced. This could potentially have a negative impact on production volumes and quality over the next couple of years, resulting in increased price volatility and a less sustainable agricultural value chain. The ICO currently estimates total production in crop year 2012-13 at 144.6 million bags, up 7.8 per cent on 2011-12. Production is expected to increase in Africa by 16.6 per cent to 18.3 million bags, with especially strong increases forecast in Ethiopia (by 19.1 per cent to 8.1 million bags) and Tanzania (by 90.3 per cent to 1million bags). In Asia and Oceania, an increase of 7.2 per cent to 42.6 million bags is provisionally estimated, despite a potential 8.6 per cent drop forecast in Vietnam. A particularly high increase of 74.7 per cent is estimated in Indonesia to a record level of 12.7 million bags. However, reports of adverse weather in Indonesia could yet reduce this figure. Coffee leaf rust has severely affected production in Central America, with total damage in the 2012-13 crop year estimated at around 2.7 million bags, costing some US$500 million.

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