Coffee prices continued their downward trend as the monthly average of the ICO composite indicator fell to 102.41 US cents/lb in August 2018, 4.5% lower than in July 2018 and 20.1% lower than in August 2017, the International Coffee Organization (ICO) said in its latest market report,
“This represents the lowest monthly average composite indicator since November 2013, when it reached 100.99 US cents/lb and the lowest monthly average for August since 2006, when the monthly indicator price was 95.78 US cents/lb.,” it said.
In August 2018 the daily composite indicator moved within a range of 98.63 US cents/lb and 106.65 US cents/lb, the report said, adding that the fall to 98.63 US cents/lb on 31 August was the lowest daily price since 14 November 2013 when it was 98.11 US cents/lb.
According to the report, prices for all group indicators fell for the third consecutive month in August 2018. The largest decrease occurred in the average price for Brazilian Naturals, which fell by 5.5% to 104.46 US cents/lb, followed by a decline of 4.4% to 80.74 US cents/lb for Robusta.
“Other Milds decreased by 4.1% to 125.21 US cents/lb, while Colombian Milds fell by 2.9% to 129.99 US cents/lb. This increased the differential between Colombian Milds and Other Milds by 44% to 4.78 US cents/lb due to the less marked decrease for Colombian Milds,” the report said.
The average arbitrage in August, as measured on the New York and London futures markets, fell by 6% to 36.18 US cents/lb, which is the second consecutive month of decrease. However, intra-day volatility of the ICO composite indicator price increased by 0.4 percentage points to 5.2% as intra-day volatility for all indicators increased.
The ICO said market fundamentals were one of the drivers of the current low prices with a number of producing countries expected to harvest bumper crops.
Total world production for crop year 2017/18 is estimated at 158.6 million bags in 2017/18. Production is expected to increase by 14.2%, to 78.4 million bags in 2018/19 for countries with an April-March crop year.
The 2018/19 production for this group of countries started in April 2018, and is currently being sold on the world market.
Production in the remaining countries has steadily increased since 2012/13, with output in 2017/18 estimated 7.6% higher at 89.96 million bags following a 1.1% increase to 83.59 million bags in 2016/17.
“In contrast to production, which significantly fluctuates from season to season while following an overall upward trend, world coffee consumption has steadily grown at an average annual rate of 2%, increasing from 90.28 million bags in 1990/91 to an estimated 162.12 million bags in 2017/18,” the report said.
The largest gains, the report pointed out, are expected to occur in South America, where consumption is estimated at 26.97 million bags, 3.3% higher than in 2016/17 with much of the growth attributed to Brazil.
“Consumption in Asia & Oceania is estimated 3% higher, at 35.8 million bags, while consumption in North America is estimated 2.6% higher, at 30.34 million bags,” the report added.