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Coffee supplies 'even more comfortable' after ICO upgrade, says Commerzbank

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The “supply situation” in coffee “now looks even more comfortable”, Commerzbank said, after the International Coffee Organization nudged higher its forecasts for stock builds in both this season and last.

 

The ICO raised by 94,000 bags to 1.18m bags its estimate for the world coffee production surplus in 2017-18, reflecting a similar increase in the output forecast to a record 158.8m bags.

 

And for 2016-17, which ended in September, it raised the estimate for the output surplus by 257,000 bags to 2.63m bags.

 

Again this reflected a higher production estimate, lifted by 257,000 bags to 157.7m bags

 

“After the ICO had already switched in November from predicting a deficit to a surplus for [2016-17], and has again revised this figure slightly upwards, the supply situation now looks even more comfortable,” Commerzbank said.

 

‘Heavy rains caused damage’

 

The raised production estimates for both seasons reflected higher figures for robusta output, for which the 2016-17 harvest received a particular upgrade - of 3.39m bags, to 59.3m bags.

 

The revision more than offset a 3m-bag downgrade to the estimate for robusta output.

 

And for 2017-18, the ICO lifted its forecast for robusta production by 309,000 bags to 61.5m bags, more than make up for a 215,000-bag cut to idea of arabica output.

 

The organisation highlighted a fall in arabica coffee output this season in Brazil, where “in addition to the expected biennial downturn of the arabica crop, smaller bean sizes and an outbreak of the coffee berry borer also contributed to the decline in production”.

 

And in Colombia, the second ranked arabica-growing country, “production is provisionally estimated to decrease by 4.3% to 14m bags as heavy rains caused damage during the flowering of the trees”.

 

Prices fall

 

The improved robusta supply ideas tallied with a particular underperformance by prices of the variety last month, when values, as measured by an ICO indicator, dropped by 4.1% to their lowest in 18 months.

 

Prices overall, including arabica grades, dropped by a more modest 2.8%.

 

Among arabica types, so-called “other milds”, produced mainly in Central America, saw a price fall of 2.5% to their lowest since January 2014, with underperformance reflecting the recovery in Central American output from levels depressed by an outbreak of the roya rust fungus.

 

Honduran production has fared particularly well, with the ICO saying that in 2017-18, coffee “output in Honduras is expected to rise by 12% to 8.35m bags, which would be the fourth consecutive season of growth”.

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