The price of Arabica coffee has increased significantly from its recent lows and had reached a level of 123.95 US cents/lb as of 6 December 2019.
November 2019 also marked the first time in the last 12 months when the International Coffee Organization (ICO) Composite Indicator consistently stayed above 100 US cents/lb.
The ICO has maintained its preliminary forecast of a small global deficit of about 502,000 bags in coffee year 2019/20. 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.
In its latest report on the market, the ICO said the monthly average of the Indicator rose 10.1% to 107.23 US cents/lb amid expectations of a global deficit in coffee year 2019/20, estimated at 502,000 bags.
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.
The ICO composite indicator rallied in November 2019, reaching a 12-month high, even as the Brazilian Real slumped to a record low against the US Dollar.
The daily price of the ICO composite rose from 102.74 US cents/lb at the beginning of November to a high of 111.86 on 25 November 2019, before closing the month at 111.77 US cents/lb. While the daily price has been on an upward trend since mid-October 2019, the November average of 107.23 US cents/lb was 10.1 per cent higher than last month.
Prices for all group indicators rose in November 2019. Brazilian Naturals saw the largest increase, of 12.1 per cent, to 109.94 US cents/lb, reflecting in part the biennial decline in the production of Brazilian Arabica as well as the weakness of the Brazilian currency.
Other Milds rose 11 per cent to 140.98 US cents/lb, while Colombian Milds rose 10.6 per cent to 146.12 US cents/lb.
The differential between Colombian Milds and Other Milds continued its ascent in November 2019, rising 0.8 per cent to 5.14 US cents/lb. Prices for Robustas increased 6.8 per cent month-on-month to 73.28 US cents/lb.
Arbitrage between Arabica and Robusta coffees, as measured on the New York and London futures markets, increased sharply to 50.31 US cents/lb, its highest level since January 2017.
The New York futures market rose 10.6 per cent, to an average of 113.31 US cents/lb in November 2019, as certified stocks fell to their lowest level since June 2018, while the London futures market climbed 8 per cent to 63 US cents/lb.
The volatility of the ICO composite indicator increased by 0.9 percentage points to 7.1 per cent over the past month. Amongst the Arabica group indicators, the volatility of Colombian Milds saw the biggest increase – 1.2 percentage points – to 7.2 per cent, while the Other Milds’ and Brazilian Naturals’ volatility increased 0.8 percentage points to 6.9 per cent and 1.1 percentage points to 9.2 per cent, respectively. The Robustas group indicator registered an increase of one percentage point in its volatility, to 6.2 per cent, due to uncertainties over the October-September crop and Brazil’s upcoming 2020/21 crop.
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. Shipments of Robustas fell 21.6 per cent to 2.82 million bags and Arabicas fell 9 per cent to 6.08 million bags. Other Mild Arabicas saw the largest decline, falling 23.2 per cent to 1.33 million bags, while Brazilian Naturals fell 9.5 per cent to 3.44 million bags. Colombian Milds, conversely, saw an increase of 13.5 per cent to 1.31 million bags compared to October 2018. The depreciation of the Colombian Peso against the US Dollar for much of 2019 could be a contributing factor for higher shipments of Colombian Milds.