 "Brazil coffee crop may cause supply deficit")
Global coffee prices have witnessed a spurt of close to 16 per cent in the last three-week period ending July 31, as bullish sentiment prevailed in the market triggered by a spate of negative reports on the current crop in Brazil.
The International Coffee Organisation (ICO) composite daily price went up to 168.55 cents per lb by July-end from 145.14 cents per pound-lb on July 11, showing a jump of 16.12 per cent. The ICO composite index consists of washed, natural Arabicas and Robusta beans.
The Brazilian crop is officially estimated to decrease by 9.3 per cent to 44.57 million bags for 2014-15 crop year, its lowest level in three years.
“The damage from the drought at the beginning of the year is expected to cause a global supply deficit in crop year 2014-15,” ICO said.
The monthly average of the ICO composite indicator for July settled at 152.5 cents per lb — up 0.4 per cent in June. However, all the four indicators like Colombian Milds, Other Milds, Brazilian Naturals and Robustas recorded their highest daily level on the last day of July, with the three Arabica groups jumping by over 12 cents in one day.
“The market has been highly volatile in the last few days as speculators are active. The market is looking for a direction, as there is no solid news on Brazilian crop. Most of the trading is done by speculators, as Europe is in a holiday period. The clear picture would emerge depending on rains in Brazil,” said Ramesh Rajah, president, Coffee Exporters' Association.
Price volatility was notably higher in July than in June, with all group indicators except Robusta recording higher monthly volatility levels, as increased speculation focused on the size of the Brazilian crop. However, price volatility remains well below the levels recorded earlier in the year, the ICO said.
According to Conab, the Brazilian crop forecasting agency, private stocks of coffee in Brazil amounted to 15.2 million bags at the end of March 2014, before the start of the 2014-15 crop. This is 9.2 per cent higher than the previous year, and follows two consecutive high crops of 50.83 and 49.15 million bags in 2012-13 and 2013-14.
The International Coffee Organisation (ICO) composite daily price went up to 168.55 cents per lb by July-end from 145.14 cents per pound-lb on July 11, showing a jump of 16.12 per cent. The ICO composite index consists of washed, natural Arabicas and Robusta beans.
The Brazilian crop is officially estimated to decrease by 9.3 per cent to 44.57 million bags for 2014-15 crop year, its lowest level in three years.
“The damage from the drought at the beginning of the year is expected to cause a global supply deficit in crop year 2014-15,” ICO said.
The monthly average of the ICO composite indicator for July settled at 152.5 cents per lb — up 0.4 per cent in June. However, all the four indicators like Colombian Milds, Other Milds, Brazilian Naturals and Robustas recorded their highest daily level on the last day of July, with the three Arabica groups jumping by over 12 cents in one day.
“The market has been highly volatile in the last few days as speculators are active. The market is looking for a direction, as there is no solid news on Brazilian crop. Most of the trading is done by speculators, as Europe is in a holiday period. The clear picture would emerge depending on rains in Brazil,” said Ramesh Rajah, president, Coffee Exporters' Association.
Price volatility was notably higher in July than in June, with all group indicators except Robusta recording higher monthly volatility levels, as increased speculation focused on the size of the Brazilian crop. However, price volatility remains well below the levels recorded earlier in the year, the ICO said.
According to Conab, the Brazilian crop forecasting agency, private stocks of coffee in Brazil amounted to 15.2 million bags at the end of March 2014, before the start of the 2014-15 crop. This is 9.2 per cent higher than the previous year, and follows two consecutive high crops of 50.83 and 49.15 million bags in 2012-13 and 2013-14.
However, given the lower crop expected in 2014-15 of 44.57 million bags, it is likely that much of these stocks will be necessary to keep the market supplied.
"It must also be kept in mind that the global stocks to use ratio is significantly lower than in previous years, currently standing at around three months of demand, compared to over eight months ten years ago. This leaves the market in a relatively vulnerable position, with global demand likely to exceed supply in the near future. Some of this demand can be met by stocks, but this situation offers significant potential for other origins to meet the shortfall", ICO said.