Coffee prices up 10.1%; trend likely to continue

The prevalent prices for Arabica only match production cost while those for Robusta are 10-12 per cent over production cost.

Prices of coffee globally continue to increase amid expectations of a global deficit in 2019-20.

In India they are moving in tandem, however growers are saying while prices of Arabica matches only cost of production, prices of Robusta fetch 10-12 per cent more than production cost.

Prices are expected to increase since deficit in coffee is estimated at 502,000 bags.

The month of November marked the first time in the last 12 months when the International Coffee Organization (ICO) Composite Indicator consistently stayed over $100 cents/lb (pound).

The daily price of the ICO composite rose from $102.74 cents/lb at the beginning of November to a high of $111.86 cents/lb on November 25, 2019, before closing the month at $111.77 cents/lb.

The daily price has been on an upward trend since mid-October 2019, and in November it grew 10.1 per cent higher than to an average of $107.23 cents/lb.

Global exports of coffee in October 2019 fell by 13.4 per cent, to 8.91 million bags, compared to the same month in the previous year.

A mix of factors, including unfavourable weather patterns and prolonged low international prices, have contributed to a decline in shipments across all regions.

Rohan Colaco, planter from Karnataka and a member of Karnataka Planters Association says the prevalent prices for Arabica only match production cost while those for Robusta are 10-12 per cent over production cost.

Karnataka accounts for nearly 70 per cent of coffee production in the country.

Global exports in October 2019 totalled 8.91 million bags, their lowest monthly level since September 2017.

This represents a drop of 13.4 per cent compared to the same period in the previous year, and of 2.4 per cent compared to October 2017.

The decline was mainly due to 12.9 per cent drop in Brazil exports.

Exports from Asia, including India, and Oceania dropped by 23.5 per cent in October.

Shipments of Robustas fell 21.6 per cent to 2.82 million bags and Arabicas fell 9 per cent to 6.08 million bags.

Exports from India were estimated at 350,000 bags in October 2019, 2.5 per cent below the same period a year earlier and 22 per cent below the same period in 2017.

In value terms, exports of coffee (including re-exports) stood at $740.55 million during January to November (upto 27th) 2019, as compared to $786.65 million, a year ago, a drop of 5.77 per cent.

Outlook

The ICO maintains its preliminary forecast of a small global deficit of about 502,000 bags in coffee year 2019-20.

This may push the prices further and it is estimated that prices of Arabica may touch $121.50 cents/lb in December and by May 2020 they are expected to touch $124.25 cents/lb.

Robusta prices are expected to touch $1,388 a tonne and $1,424 a tonne by May 2020.

Despite a slowdown in growth, consumption is predicted to overtake production during the course of the year.

Most of the growth in consumption, in both absolute and relative terms, is expected to come from Asia and Oceania.

On the production side, Brazil’s smaller off-year Arabica crop and adverse weather in parts of Central America and Asia could continue to affect prices in the coming weeks.

However, the impact of these factors may be muted due to the recent weakness of the Brazilian Real as well as the upcoming on-year crop in Brazil.

Photograph: Jagadeesh Nv