Market Insight
3880 views March 12, 2015 posted by Maja Wallengren

ICO Says Coffee Prices Continue Decline Despite Production Deficit Predictions


MAR 4, 2015 (DailyNewsByRoastMagazine)–Green coffee prices continued in a downward slide through February, despite recent estimates that global production will result in a deficit this year, according to the latest monthly report from the London-based International Coffee Organization.

The ICO’s composite indicator price — a historical data series that reflects price monitoring for coffees from all the world’s main growing regions — dropped to a monthly average of $1.411 USD per pound in February, a 4.6 percent decline from January and the lowest monthly average in a full year. The ICO attributes the price drop, which has followed a peak of $1.85 in October 2014, to “heavy selling pressure” in Brazil, where weather conditions have been favorable for the current crop.

Despite the immediate downward trend, ICO data suggest an upward trend may be imminent, as current estimates for world production for the crop year 2014/15 are at 142 million bags, a 4.6 million drop off from last year.

“This puts the coffee market into a deficit for the current year, although stocks in exporting countries have so far allowed exports to continue at a strong pace,” the ICO said.

Arabicas, particularly from Brazil and Colombia, saw the sharpest decreases last month, at 6 percent and 5.8 percent, respectively, as the composite price for robustas actually increased minimally.

The ICO’s February report contains some unexpected good news in the form of revised upward production estimates in some traditionally smaller global markets. While the total production estimate is 3.2 percent less than last year, it was revised upward slightly due to strong performances in Honduras, Tanzania, Cameroon, Rwanda and Burundi. Estimates have been revised downward in India and slightly downward in Mexico, while Brazil, Vietnam, Colombia and Indonesia held steady over the previous month.

In its regional breakdowns, the ICO suggests total output will be decreased by 6.8 percent in South America, and by 4.8 percent in Asia and Oceania. Output is expected to increase by nearly 8 percent in Mexico and Central America, which are still trying to rebound to 2010/11 levels, before the leaf rust outbreaks. Additionally, African coffee production is now estimated to reach 17 million bags, which would be the highest output from the continent since 1999/2000.

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