Global Arabica coffee prices rise in March as Robusta’s fall

y George Mangula

Global prices for Arabica coffee rose in March 2020 due to concerns over the availability of that type of coffee while Robusta prices fell by 0.9 percent to 67.46 US cents/lb, says International Coffee Organisation (ICO) in the latest report.

However, according to the report, after two months of decrease, the ICO composite indicator rose in March, averaging 109.05 US cents/lb, 6.9 percent higher than in February. This, according to the report, is the second highest monthly average in coffee year 2019/20.

Concerns over disruptions to the supply chain, as March is usually a month of lower stock on-hand in countries with crop years commencing in April, particularly Brazil,  pushed prices higher, says the report.

Meanwhile, the volatility of both Arabica and Robusta coffee types increased by 1.8 percentage points to 9.6 percent over the past month. The report shows Robusta group indicator volatility was 4.5 percent, a decrease of 2.3 percentage points from February 2020.

Global exports

According to the report, global exports in February 2020 totalled 11.11 million bags, compared with 10.83 million in February 2019. It adds exports in the first five months of coffee year 2019/20 have decreased by 3.4 percent to 50.97 million bags compared to 52.78 million bags for the same period in 2018/19. “Exports of Arabica decreased by 7.8 percent to 31.86 million bags in October 2019 through February 2020 while Robusta shipments increased by 4.8 percent to 19.1 million bags.”

World coffee consumption

According to the report, world coffee consumption in 2019/20 is estimated at 169.34 million bags, 0.7 percent higher than in 2018/19 as Coronavirus Disease (Covid-19) presents considerable downside risk to global coffee consumption. The report adds, “Currently demand is estimated to exceed production, estimated at 168.86 million bags, by 0.47 million bags in 2019/20.” However, the report notes, “Situation is evolving quickly impacting both supply and demand. On one hand, coffee consumption may contract as a result of the containment measures against the spread of Coronavirus, particularly for out-of-home consumption.”

Further, the report notes global economic growth in 2019/20 is expected to be much lower than initially forecast, accompanied by rising unemployment rates, further reducing demand and putting downward pressure on prices. On the other hand, the report says, disruptions to the supply chain both in shipping and harvesting could lead to temporary shortages in the supply, putting upward pressure on prices in the short term.

Manufacturing global coffee data

For each year, the ICO Secretariat uses statistics received from members to provide estimates and forecasts for annual coffee production, consumption, trade and stocks. It uses the concept of the marketing year, that is the coffee year commencing on 1st October of each year, when looking at the global supply and demand balance.

Coffee-producing countries including Uganda (Africa’s number exporter) are located in different regions around the world, with various crop years, thus; the 12-month period from one harvest to the next. The crop years currently used by the ICO Secretariat commence on 1^st April, 1st July and 1^st October. “To maintain consistency, ICO converts production data from a crop year basis to a marketing year basis depending on the harvest months for each country. Using a coffee year basis for the global coffee supply and demand, as well as prices ensures that analysis of the market situation occurs within the same time period.”

For example, the report says the 2014/15 coffee year began on October 1, 2014 and ended September 30, 2015. However, for producers with crop years commencing on April, the crop year production occurs across two coffee years. Brazil’s 2014/15 crop year began on April 1, 2014 and finished March 31, 2015, covering the first half of coffee year 2014/15. However, Brazil’s 2015/16 crop year commenced April 1, 2015 and ended March 31, 2016, covering the latter half of coffee year 2014/15. In order to bring the crop year production into a single coffee year, the ICO Secretariat explains that it would allocate a portion of the April-March 2014/15 crop year production and a portion of the April-March 2015/16 production into 2014/15 coffee year production.

“It should be noted that while estimates for coffee year production are created for each individual country, these are made for the purpose of creating a consistent aggregated supply-demand balance for analytical purposes, and does not represent the production occurring on the ground within the individual countries,” says the report.