ICO November report: coffee prices rise on concerns over 2021 production

After falling by 8.9% in October, the monthly average of the ICO composite indicator rose by 3.6% to 109.79 US cents/lb in November

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The following is an abstract of the ICO Coffee Market Report of November 2020.

The ICO composite indicator rose by 3.6% to 109.70 US cents/lb as prices for all group indicators increased, except Other Milds, which fell by 0.9% to 150.73 US cents/lb.

World coffee production in coffee year 2019/20 decreased by 1.6% to 168.55 million bags as a consequence of a 5.1% decline in Arabica output to 95.73 million bags, while Robusta production rose by 3.2% to 72.82 million bags. South America’s production fell by 4.6% to 78.87 million bags, due largely to the decline in Brazil’s Arabica output in the off-year of the biennial crop cycle. Production from Asia & Oceania grew by 4.1% to 50.07 million bags, due largely to the recovery of output in Indonesia and Vietnam. Production in Central America & Mexico declined by 4.5% to 20.76 million bags, while Africa’s output remained stable at 18.86 million bags.

World coffee production exceeded global consumption by 961,000 bags as world coffee demand decreased by 0.9% to 167.59 million bags.  

 The daily composite indicator ranged between 103.77 US cents/lb and 108.72 US cents/lb in the first two weeks of the month. In the second half of the month, however, it reached a low of 110.22 US cents/lb on 24 November and a high of 116.17 US cents/lb on 27 November. A delayed start to Vietnam’s harvest, concerns over the prolonged drought in Brazil, and the damage caused by hurricanes Iota and Eta in Central America boosted prices in November, though the bearish outlook for the global economy limited further recovery.

Prices for all group indicators rose in November 2020, except Other Milds, which fell by 0.9% to 150.73 US cents/lb. The average price for Colombian Milds rose by 4.5% to 161.21 US cents/lb. As a result, the differential between Colombia Milds and Other Milds more than quadrupled from an average of 2.22 US cents/lb in October to 10.48 US cents/lb in November 2020. The average price for Brazilian Naturals grew by 6% to 106.41 US cents/lb while Robusta prices averaged 72.38 US cents/lb, 5.9% higher than in October 2020.

The average arbitrage in November, as measured on the New York and London futures markets, rose by 2.1% to 52.66 US cents/lb. Stocks of certified Arabica increased by 7.7% to 1.4 million bags in November 2020, which is the second consecutive month of increase. Certified Robusta stocks amounted to 2.25 million bags, 10.3% higher than in October 2020.

The volatility of the ICO composite indicator price decreased by 2.3 percentage points to 6.5% as the volatility of all group indicators decreased. The volatility for Colombian Milds declined by 2 percentage points to 6.2%, for Other Milds by 0.8 percentage points to 7%. and for Brazilian Naturals by 2.8 percentage points to 9.4% in November 2020. The volatility for Robusta prices reached 6.1%, 3.4 percentage points lower than in October 2020.

Global exports in October 2020, the first month of coffee year 2020/21, totalled 9.67 million bags, which represents an increase of 3.2% compared to October 2019. Shipments of Robustas rose by 10.4% to 3.34 million bags and Arabicas fell by 0.3% to 6.33 million bags. Colombian Milds saw the largest decline, falling 12.3% to 1.16 million bags, while Other Milds declined by 6% to 1.43 million bags. Brazilian Naturals, conversely, saw an increase of 6.7% to 3.74 million bags compared to October 2019. The depreciation of the Brazilian Real against the US Dollar is a contributing factor for higher shipments of Brazilian Naturals while Robusta shipments are bolstered by sustained demand for soluble coffee.

For the first ten months of 2020, total exports are 3.8% lower at 107.08 million bags, compared to 111.28 million for the same period last year. Shipments for all groups declined, with the exception of Brazilian Naturals, which rose by 1% to 33.65 million bags. In January to October 2020, exports of Colombian Milds decreased by 11.2% to 10.93 million bags, while shipments of Other Milds fell by 10.8% to 21.86 million bags and those of Robusta dropped by 1.3% to 40.65 million bags. 

World production in coffee year 2019/20 is estimated at 168.55 million bags, which is 1.6% lower than in 2018/19. Production of Robusta increased by 3.2% to 72.82 million bags with the largest increases in Vietnam, Indonesia, and Uganda. Arabica production fell by 5.1% to 95.73 million bags, as increases in Colombia, Ethiopia, Indonesia, and Mexico could not offset losses in output from Brazil and Honduras. 

Hurricanes Iota and Eta: ICO commits to mobilizing resources toward recovery

In the wake of hurricanes Iota and Eta, the International Coffee Organization (ICO) stands in solidarity with the victims of this devastating disaster and commits to mobilizing much-needed resources towards the recovery.
“We are working to mitigate the impact of this climate-related tragedy on the life and work of coffee farmers in the region. The ICO and its staff express their sincere condolences to the people of Honduras, Nicaragua, Panama, El Salvador and Guatemala. People have lost their lives, their homes and their livelihoods. We are taking immediate action to support our friends in Central America, we will get through this together,” said José Sette, ICO’s Executive Director.

Hurricanes Iota and Eta were some of the most powerful Atlantic storms on record, with the countries worst hit being Honduras and Nicaragua; meanwhile, covid-19 is circulating in the affected areas and further aggravating the disaster. Using its convening power, the ICO is rallying the international community on this issue, including ICO Members, other international organizations and donors, the private sector, regional organizations and financial institutions such as the Central American Bank for Economic Integration (CABEI) and the Inter-American Development Bank (IADB).

“The ICO was there for our country after Hurricane Mitch in October 1998, supporting the rehabilitation of coffee production in Honduras and Nicaragua, and it is here for us now. We welcome this much-needed support and the mobilization of the global coffee community. In Honduras, the Government and all coffee institutions are coordinating cooperation efforts with all international organizations and financial institutions. This is the time for the ICO, its Members and the private sector to support us during this tragic moment in which 3.5 million people have been affected in Honduras and where a large part of the coffee infrastructure has been destroyed. The coffee sector is the most important agricultural sector in Honduras, generating 1.5 million jobs during harvest times,” said H.E. Ambassador Ivan Romero Martinez of Honduras.

“The ICO will work with partners to help rebuild resilience and promote recovery in the region through supporting the recovery of production, logistics assets and infrastructure. We shall build on the ICO’s previous successful efforts, such as when we helped countries in the region to recover their trade and production assets in the aftermath of Hurricane Mitch and Denis. We will mobilize co-funding through the Common Fund for Commodities (CFC) and local government. We do not leave our Members out in the cold, we are there in their darkest hours,” said Mr Sette. The ICO and its Members once again would like to express their strong resolve to stand in solidarity with the people of Honduras, Nicaragua and the rest of Central America following the impact of these serious natural disasters.