Coffee – Robusta prices at five-and-a-half year low, pressure likely to continue

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The coffee market dropped to a two-year low in January, primarily driven by falling Robusta prices, the International Coffee Organization (ICO) said, adding that prices were likely to be under pressure as the Brazilian production is expected to touch new highs in the next season due to favourable climatic conditions.

The ICO said in its latest monthly report that exports for the first quarter of coffee year 2015/16 were 2.6 percent higher than last year on 26.9 million bags, with minimal supply concerns at this time.

“Conab have released their first estimate of coffee production in Brazil for the upcoming crop year 2016/17, which is provisionally expected to recover to the record volumes of 2012/13 and 2013/14, following two years of lower output. This may also be putting downward pressure on prices,’ it said.

Coffee prices fell further in January, with the monthly average of the ICO composite indicator down by 3.3% to 110.89 cents, its lowest level since January 2014, the trade body said, adding that the daily price dropped to a minimum of 106.74 cents on January 20, the lowest daily level since January 2, 2014. “This dip coincided with a broader rout in commodity prices, led by the collapse in oil prices. Coffee prices recovered slightly towards the end of the month, but remain at very low levels.”

According to the ICO, this decline in the market was most pronounced in the Robusta group, which fell by 5.8 percent to 74.71 cents, its lowest monthly level since May 2010. “This has been attributed to higher supply anticipated from Vietnam, with the new crop shortly to come to market and significant carryover stocks expected from last year’s crop. The three Arabica groups also fell, with Colombian Milds, Other Milds and Brazilian Naturals down by 3.3 percent, 2.4 percent and 2 percent respectively, with the supply outlook also looking positive,” it said in the report.

Total exports in December 2015 came to 9.3 million bags, 1.3 percent more than December 2014. This brings exports for the first quarter of coffee year 2015/16 (October to December) to 26.9 million bags, up 2.6 percent compared to the same period last year, the report said.

Shipments of Arabica coffee were up by 11 percent to 17.6 million, with the biggest increase found in Colombian Milds, as Colombia shipped 3.5 million bags of coffee, its highest volume for the quarter since 2001/02. Other Milds were also up by 11.7 percent and Brazilian Naturals by 9.6 percent.

Exports of Robusta, on the other hand, ICO said, are estimated lower by 10.1 percent compared to last year, with exports from the two largest origins, Vietnam and Indonesia, estimated down by 11 percent and 23.4 percent respectively. However, exports from Vietnam have started to pick up, with the 2 million bags estimated in December the highest monthly volume since March 2015.

The trade body the first forecasts released by Brazil’s Conab showed production in the 2016/17 crop year starting in April could recover strongly from 43.2 million bags in 2015/16 to between 49.1 million and 51.9 million bags. “The upper end of this range would represent a record crop for Brazil, higher than the 50.8 million produced in 2012/13. Arabica production is provisionally up by between 17.8 percent and 24.4 percent, which has been attributed to favourable climatic conditions, and the fact that 2016/17 is an on-year in Brazil’s biennial production cycle. Robusta is up more modestly by between 1.8 percent and 8 percent, which would still be lower than the level in 2012/13,” it said.

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