ICO market report predicts second year of surplus

The International Coffee Organization (ICO) December 2018 market report expects coffee year 2018/19 (April 2018 to March 2019) to be the second consecutive season of surplus. The report estimates global output at 167.47 million bags, which exceeds its expectations of world coffee consumption, at 165.18 million bags. However, at 2.29 million bags, the surplus for 2018/19 is projected to be one million bags less than in 2017/18 given the stronger growth in demand. The ICO says this excess in supply continues to put downward pressure on prices that will likely continue over the next few months. After a decrease of 1.5 per cent to 109.59 US cents per pound in November 2018, the monthly average of the ICO composite price indicator fell sharply to 100.61 US cents per pound in December 2018. Prices for all group indicators declined in December 2018, with the largest decreases for Brazilian Naturals and Colombian Milds, which fell by 9.9 per cent to 102.10 US cents per pound and by 8.2 per cent to 127.86 US cents per pound, respectively. Other Milds decreased by 7.3 per cent to 127.10 US cents per pound, reducing the differential with Colombian Milds to just 0.76 US cents per pound in December 2018. Robusta fell by 7.1 per cent to 77.57 US cents per pound. Brazil’s coffee production is estimated to reach 61.7 million bags in 2018/19. The ICO says Brazil will remain the world’s largest coffee producer in coffee year 2019/20, with output estimated at 58.5 million bags. Vietnam’s production is estimated down 3.4 per cent at 29.5 million bags in 2018/19 as lower level of inputs and poor weather damaged yields. Colombia’s production is estimated at 14.2 million bags for coffee year 2018/19, following a harvest of 13.82 million bags in 2017/18. Indonesia’s output is estimated at 10.2 million bags, 5.6 per cent less than in 2017/18. Ethiopia’s output in 2018/19 is estimated at 7.5 million, up 0.6 per cent from 2017/18. The ICO says Ethiopia has grown steadily since 2012/13. Production in Honduras this year is estimated to be 1.5 per cent lower at 7.45 million bags. This decline follows four consecutive seasons of growth. The ICO attributes the decline to rising costs, particularly labour, and an environment of low prices. Excessive rains and flooding impacted India’s 2018/19 harvest, which is estimated down 10.5 per cent to 5.2 million bags. World coffee exports reached 9.88 million bags in November 2018, compared with 9.35 million in November 2017, an increase of 5.7 per cent.

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