For this reason, the ICO is committed to establish itself as the statistical benchmark for the industry, operating as an information centre that provides consolidated figures on production, consumption, exports and stocks.
The coffee sector is unique amongst the universe of soft commodities for presenting a wildly divergent picture when contrasting the various estimates and projections coming from the most respected analysts.
This can only contribute to greater distortions in understanding the market, potentially enhancing the divorce between the fundamentals and speculative behaviour we all wish to avoid.
As concrete steps towards this task, we have begun a coffee round table on statistics with a select group of leading analysts from industry and research institutions to discuss and compare our results in a spirit of collaboration and good faith. This is an on-going activity that will bear its fruit in the mid and long term.
Parallel to this work, we have put together the first Global Coffee Outlook Report, with the idea of offering to our Members and the general public a comprehensive overview of the coffee sector over the past 50 years. The report looks into past, current and future prospects of prices, supply, demand and stocks, as well as some of the key issues pertaining to the sustainability of the coffee industry.
Environmental: The ICO has aimed at establishing itself as a focal point of dissemination of pertinent information on the challenges faced by the world coffee sector in the face of environmental concerns. In particular, we are paying special attention to the effects of climate change and its consequences on present and future supply.
We are currently collaborating with the Coffee&Climate Initiative to enhance our outreach in this field and potentially host its toolbox, allowing coffee farmers around the world a practical guide on adaptation to the climate change and mitigation of its harmful effects.
Social: The majority of coffee‐growing countries, and therefore ICO members, are developing countries, whereas importers are overwhelmingly developed countries.
A key tenet of the ICO programme of activities is focused on poverty eradication, promoting value addition in developing countries and how to contribute towards achieving the Millennium Development Goals (MDGs). In this respect, the organization has been working in partnership for over 17 years with the Common Fund for Commodities, serving as bridge for the allocation of resources for coffee development projects.
As is probably known to all of you here present, the Fund has severely curtailed its funding capacities, and in response we are putting together a radical transformation of the way in which the ICO handles its communications and public relations, with the view of strengthening its outreach when seeking sources of funding for these projects that must continue to benefit our Members.
Hand in hand with the strengthening of the supply chain through projects, the new communications plans will also allow the ICO to promote coffee in the generic, pre‐competitive manner that befits a non for profit multilateral organization.
Having presented an outline of the strategic areas of work for the organization, allow me to comment on the worrying situation of low prices we are currently witnessing and that makes ever more relevant the action of the ICO.
Although the present situation is mainly due to a perceived over-capacity in coffee production, it must be noted that the world coffee market is characterised by a high degree of volatility, marked imperfections and asymmetries.
Of particular relevance is the asymmetrical development of the Arabica and Robusta markets. Whereas demand for Arabica has been weak, that of Robusta has experienced a very vigorous growth, mostly explained by increased demand from emerging markets.
This explains that in spite of increased supply, we see a continued drawdown of Liffe certified stocks taking place. At the same time, capacity for expanding production of
Robusta is rather limited at least in the short term, and with a current arbitrage at lows not seen since 2008, the potential for a switchback to Arabica could be in the cards. Overall demand prospects are encouraging, but we must come to terms with the fact that many emerging economies have been experiencing a significant reduction in their GDP growth rates, resulting in smaller than expected coffee consumption growth.
At the beginning of the previous decade, the value chain was perceived as progressively evolving to the detriment of producing countries, as not functioning in a balanced way and as resulting in a sharp decline in the share of earnings received by those countries.
