Concerns over Robusta forecasts push up prices: ICO

The International Coffee Organization’s (ICO) composite indicator monthly average was up by 1.7 per cent to US$1.1991 in May, representing four consecutive months of higher monthly prices, according to the ICO’s monthly market report. According to the report, this is the highest monthly average so far in 2016, but is still slightly lower than the same time last year. The report also points out that the ICO composite indicator has remained within a relatively narrow band over the last year, with the monthly averages staying between 110 and 125 cents. In terms of the group indicators, Robustas continued their strong performance, increasing by 4.7 per cent compared to April to reach 83.93 US cents, representing a nine month high. The three Arabica groups all registered increases of less than 1 per cent. Exports of coffee in April 2016 are estimated at 9.3 million bags, down 8.1 per cent compared to the same time last year, the report says. The ICO attributes this to a slowdown in shipments from Brazil, which dropped by 25 per cent to 2.4 million bags. The report suggests that availability from the previous years’ crops has been mostly exhausted, given the recent impressive export performance from Brazil. This brings total exports for the first seven months of coffee year 2015/16 (October to April) to 65.2 million bags, 0.7 per cent more than last year. Lower shipments of Robustas have been largely offset by higher exports of Arabica. The Brazilian coffee authorities, Conab, have released their second estimate of production in crop year 2016/17, which started in April. Output is currently estimated at 49.7 million bags, at the lower end of the range issued back in January, but still an increase of 14.9 per cent compared to 2015/16. Arabica is expected to increase by 25.6 per cent to 40.3 million bags, which would be the largest Arabica crop on record. This increase is mostly due to higher yields as the area planted is broadly unchanged. Robusta production, on the other hand, is estimated at 9.4 million bags, 16 per cent less than the previous year and below the bounds of the range given in January. This would be the lowest Robusta crop in over 10 years, as dry weather has had a severe negative effect in several Robusta producing regions. If realised, this production estimate of 49.7 million bags would be the second highest Brazilian crop on record, and would suggest that Brazil is no longer suffering from the effects of the drought that negatively affected output in 2014/15 and 2015/16, the report says.

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