LONDON – Coffee prices in March were characterized by significant volatility, with the ICO composite indicator increasing to 177.29 US cents/lb midway through the month, before dropping by 15.6% to 153.33 cts in the next 8 days. To read Coffee Market report click HERE
The monthly average settled on 165.03 cents, an increase of 19.8% compared to February, and the highest monthly level since March 2012.
These price developments have been driven primarily by the weather in Brazil; some scattered rainfall was recorded in the coffee growing areas, curtailing the rapid price increases of the last two months, but prices remain highly unstable.
Furthermore, it is difficult to estimate the extent of the damage from the drought and high heat until the crop is being harvested, although a recent study has referred to it as the largest climate anomaly since the ‘Black Frost’ of 1975, warning that damage to the 2015/16 crop could be even worse.
In terms of group indicators, the strongest increases were observed in the three Arabica prices, with the monthly averages of Colombian Milds, Other Milds and Brazilian Naturals all increasing by well over 20% compared to February. Robustas also jumped by nearly 10%, leading to an increase in the arbitrage between Arabicas and Robustas.
Price volatility has also increased significantly in the last two months.
The rolling 30-day price volatility of the ICO composite indicator price exceeded 15% during March 2014. This reflects the extreme uncertainty prevalent in the market currently, which can mostly be attributed to the weather in Brazil and uncertainty over the 2014/15 crop.
In addition, the coffee authorities in Vietnam have advised that 2014/15 production will be significantly lower than 2013/14, while there are also concerns over production in India, Indonesia and Mexico
World coffee consumption, on the other hand, continues to exhibit dynamic growth.
An initial estimate of total consumption in calendar year 2013 suggests a significant 2.7% increase to 145.8 million bags, up from 142 million in 2012.
This represents an average annual growth rate of 2.1% over the last four years.
Download the report (PDF file) at this link.
