Coffee prices rallied slightly from a 17-month low in June, in large part through rebounding robusta prices. This according to the London-based International Coffee Organization‘s latest monthly report, which noted that the composite green coffee price in June, despite a 1.2 percent increase over May, is still the second-lowest price in a 17-month period.
“In the longer term, the low prices recorded over the last quarter, though not yet reaching crisis levels, will not encourage investment in the sector, and could result in reduced supply as producers withdraw from the market,” the ICO said. Read the full report here.
The ICO’s composite indicator price, comprising numbers for arabicas and robustas from all the world’s main growing regions, settled on an average of $1.249 USD per pound in June, with little volatility seen in daily prices throughout the month. June also represented the sixth consecutive month of reduced exports compared to last year, causing the ICO to state that “the market seems to have no immediate supply concerns, particularly as recent reports suggest an optimistic view of coffee production.”
One of those optimistic views is that of the USDA, which biannually publishes a comprehensive global coffee market forecast. Its latest report came June 15, projecting world coffee production at 6.4 million bags higher than 2014/15 due largely to increased output in Indonesia, Honduras and Brazil. Said the ICO, “This bearish market sentiment was exacerbated by the release of the US Department of Agriculture’s biannual coffee report, which forecast a significant surplus of 5 million bags in 2015/16, on top of a slight surplus of 290,000 bags in 2014/15.”
While all three of the ICO’s monitored arabica groups — Colombian Milds, Other Milds and Brazilian Naturals — saw slight price increases throughout June, the biggest rally came from Robustas, which rose by 3.1 percent on average. The group attributes this to some uncertainty in Vietnam, where coffee stockpiles are diminishing or at unknown levels, and exports compared to last year were down more than 40 percent for the month.
Of particular note in the ICO’s report is that the current composite price difference between arabicas and robustas has decreased to $0.55, the narrowest arbitage between the groups since January of last year. Said the ICO, “This could potentially encourage roasters to adjust their blends to increase the proportion of Arabica coffee.”
Read the full June report.