Global coffee surplus seen hitting prices as consumption falls – ICO

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Global output in 2019/20 is estimated at 168.84 million bags, 2.5% lower than in 2018/19. Arabica output is estimated to decrease by 5% to 96.05 million bags while Robusta output is expected to rise by 1.1% to 72.78 million bags, the International Coffee Organization (ICO) said its ltest monthly report.

The decrease in output, it said, is attributed primarily to the reduction in Brazil as it was an off-year for its Arabica production. Additionally, the ongoing low prices as well as the effects of covid-19 on labour supply have also contributed to the lower output.

In 2019/20, global coffee consumption is estimated to fall by 0.9% to 167.59 million bags following an increase of 4.6% in 2018/19 to 169.11 million bags, the ICO said, adding that demand is estimated downwards due to ongoing pressure from a global economic downturn and limited recovery in out-of-home consumption as social distancing measures remain in place globally.

“Although both production and consumption decreased, 2019/20 is seen in surplus, with global output exceeding consumption by 1.24 million bags,” it said.

The ICO composite indicator reached 107.25 US cents/lb in coffee year 2019/20. This compares to an average of 100.47 US cents/lb in 2018/19 when the surplus reached nearly 4 million bags.

Further recovery in prices over the next few months will likely be limited by this surplus and the prospects of more coffee reaching the market, particularly Brazil’s 2020/21 crop, an on-year of the biennial Arabica production cycle. according to the ICO.

In September 2020, world coffee exports rose by 0.9% to 10.16 million bags compared to September 2019. Shipments of Arabica fell by 4.1% to 6.17 million bags, but Robusta exports offset this fall, rising by 9.6% to 4 million bags. Colombian

Milds recorded the largest decrease in September, falling by 12.5% to 953,000 bags. Exports of Other Milds fell by 6.9% to 1.82 million bags, while Brazilian Naturals rose by 0.2% to 3.39 million bags.

According to the ICO, global coffee shipments fell by 4.9% to 126.9 million bags in coffee year 2019/20 compared with coffee year 2018/19.

In October 2019 to September 2020, Robusta exports recorded the smallest decrease, declining by 1.4% to 48.68 million bags. Shipments of Other Milds fell by 9.8% to 25.15 million bags, Colombian Milds by 7.2% to 13.88 million bags and Brazilian Naturals by 4.9% to 39.18 million bags.

The total value of coffee exports fell by 3.6% to $17.87 billion compared to coffee year 2018/19 while the average unit value per pound of green bean
equivalent decreased to 148.66 US cents compared to 177.50 US cents in 2018/19, the ICO added.

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