Coffee prices rallied slightly in July, supported by the possibility of frost in Brazil ‘s coffee-growing regions, before falling back down by the end of the month. The average of the ICO composite indicator increased by 1.2% compared to the previous month, but is still at its second-lowest level since September 2009.
Coffee prices fell sharply in June 2013, as market fundamentals, combined with an uncertain macroeconomic outlook, drove the ICO composite indicator price to its lowest level since September 2009. The market remains well supplied with coffee, with total exports for the first eight months of coffee year 2012/13 (October to May) reaching 75.7 million bags, compared with 72 million in the same period last year.
Coffee prices declined further in May 2013, causing the ICO composite indicator price to fall to its lowest monthly average since April 2010. All four group indicators decreased compared to the previous month, with the biggest percentage drop recorded in Robustas. This is reflected in the arbitrage between the New York and London futures markets, which widened for the second month in succession. The sustained drop in prices observed over the last two years has reduced the revenue earned by coffee producers, and consequently there is concern that many producers may be selling at a price which is not remunerative compared to the cost of production.
The ICO composite indicator price fell by 1.4% in April, despite a brief rally in the middle of the month, recording its lowest monthly average in three years. Robustas underwent the strongest decline, causing the Arabica/Robusta differential to widen. Following the significant slide in green coffee prices over the last two years, retail prices are also starting to come down, with decreases recorded in several importing countries in 2012.
Coffee prices stabilized in March 2013, with the monthly average of the ICO composite indicator price essentially unchanged on the previous month. The epidemic of coffee leaf rust in Central America has had severe social and economic consequences, with losses in the region estimated by PROMECAFÉ at 2.3 million bags, worth nearly US$550 million, and around 441,000 direct job losses.
The ICO composite indicator price tracked downwards in February, despite the ongoing damage caused by the outbreak of coffee leaf rust in Central America. This trend was driven by movements in Arabicas, with all three group indicators losing value. Prices of Robustas, on the other hand, were much firmer, increasing to their highest monthly average since October 2012.