LONDON, UK — The monthly average of the ICO composite indicator decreased by 1.5% to 109.59 US cents/lb in November 2018 following the 13.3% increase to 111.21 US cents/lb last month, reflecting the fall in prices for all group indicators. The price for Robusta fell 2.1% to 83.52 US cents/lb, while Brazilian Naturals fell 2% to 113.27 US cents/lb.
The differential between Colombian Milds and Other Milds decreased 38.1% to 2.16 US cents/lb, as the monthly average for Colombian Milds fell by 1.1% to 139.27 US cents/lb, compared to a decrease of 0.2% to 137.11 US cents/lb for Other Milds.
In coffee year 2017/18, global output, estimated at 163.51 million bags, exceeded world consumption, estimated at 161.93 million bags, by 1.59 million bags. This excess in supply has put downward pressure on prices that may continue over the next few months.
The increase in supply is also reflected in the export data. World coffee exports increased by 17% to 10.41 million bags in October 2018, compared with 8.89 million in October 2017. In the twelve months ending October 2018, global shipments amounted to 123.5 million bags, 4.2% higher than last year.
After increasing 13.3% last month, the monthly average of the ICO composite indicator fell by 1.5% to 109.59 US cents/lb in November 2018. The daily composite indicator declined over the first two weeks before levelling off in third week, and then fell by 3.26 US cents/lb on the last day of the month.
While prices have decreased, the daily composite indicator remained above 100 US cents/lb throughout November 2018, ranging between 104.40 US cents/lb and 115.90 US cents/lb. Ample supplies on the market and a weakening of the Brazilian Real have contributed to the decrease.
Prices for all group indicators fell in November 2018 compared to the previous month. The largest decreases occurred in the average price for Robustas and Brazilian Naturals, which fell by 2.1% to 83.52 US cents/lb and by 2.0% to 113.27 US cents/lb, respectively.
Colombian Milds declined by 1.1% to 139.27 US cents/lb while Other Milds fell by 0.2% to 137.11 US cents/lb. As a result of the larger decrease in the monthly average for Colombia Milds compared to Other Milds, the differential fell by 38.1% to 2.16 US cents/lb.
In 2018, the Colombian peso appreciated more sharply against the US dollar than the currencies of producers of Other Milds, allowing Colombian exporters to sell at a lower price.
This has contributed to the decline in the differential between Colombian Milds and Other Milds.
In November, the average arbitrage between Arabica and Robusta coffees, as measured on the New York and London futures markets, declined by 1.7% to 41.83 US cents/lb, following a significant increase last month.
However, intra-day volatility of the ICO composite indicator price rose by 1.3 percentage points to 8.5%, as the intra-day volatility of all Arabica indicators increased.
World coffee exports reached 10.41 million bags in October 2018, compared with 8.89 million in October 2017. This is an increase of 17% and is the largest volume on record shipped in October. In the twelve months ending October 2018, exports of Arabica totalled 77.56 million bags, compared to 75.74 million bags last year. Meanwhile, Robusta exports amounted to 45.95 million bags compared to 42.77 million bags.
Brazil’s exports in October 2018 increased by 29.1% to 3.75 million bags, which is the largest volume on record for October shipments. This rise was driven by shipments of green coffee. In October 2018, Brazil exported 3.46 million bags of green coffee, which was the largest monthly volume of green coffee in crop year 2018/19. It was also the largest October shipment in the last five years.
Shipments of green Robusta reached 364,715 bags in October 2018 and shipments for April 2018 to October 2018 amounted to 1.95 million bags, which compares to just 159,818 bags exported in the same period one year ago.
This indicates that Brazil’s Robusta crop has recovered from drought in previous years. Exports of green Arabica reached 15.27 million bags in the first seven months of Brazil’s 2018/19 crop year, 4.1% higher than last year. However, this is lower than the 16.24 million bags shipped in April 2016 to October 2016, which is the previous on-year for Arabica production.
Total coffee shipments in the 12 months ending October 2018 rose by 5.4% to 33.18 million bags.
Vietnam’s exports are estimated at 2.1 million bags in October 2018 compared with 1.38 million bags in October 2017. Exports for the year ending October 2018 are estimated at 29.37 million bags, 28% higher than in the same period last year, reflecting the larger harvest in crop year 2017/18.
Growing global demand for soluble coffee has greatly encouraged demand for Robusta and in turn, increased Vietnam’s exports as it is the largest producer of this type. While the majority of Vietnam’s exports are unprocessed coffee, the share of soluble coffee has been increasing.
In January to October 2013, Vietnam exported 175,460 bags of soluble coffee, accounting for 1% of its total exports during that period. In January to October 2018, Vietnam is estimated to have shipped 1.52 million bags of soluble coffee, representing 6.1% of total exports.
In October 2018, Colombia’s exports are estimated at one million bags, 11% lower than October 2017, due to the smaller volume of production this past year. In the year ending October 2018, Colombia exported 12.6 million bags, compared to 13.38 million bags one year ago.
Colombia primarily exports unprocessed coffee; though soluble coffee has accounted for around 5.7% of shipments in the last five years. In January to September 2018, Colombia exported 605,263 bags.
While still relatively small, exports of roasted coffee have also gained ground. In January to September 2013, Colombia exported 51,833 bags of roasted coffee, representing 0.8% of total exports while in January to September 2018, it shipped 118,775 bags, accounting for 1.3% of the total.
Global consumption for October 2017 to September 2018 is estimated at 161.93 million bags, 1.8% higher than last year. World production increased by 4.8% to an estimated at 163.51 million bags, exceeding consumption by 1.59 million bags.
This excess in supply and the strong pace of exports has put downward pressure on global coffee prices. Prices may remain low over the next few months as output from October to September harvests is coming to market at levels similar to or greater than last year.
Output from the largest producing countries is anticipated to remain stable or increase in coffee year 2018/19. Global economic growth is not expected to surpass 2017, which could limit growth in global coffee consumption.
