Surplus threatens coffee prices

Tuesday January 15 2019

Coffee prices  have been destabilised by a

Coffee prices have been destabilised by a surplus in production that is expected to extend into the 2018/19 coffee year. Photo by Edgar R Batte  

By Dorothy Nakaweesi

Coffee prices are expected to further move southwards as the world prepares to receive second consecutive season of surplus production.
Data from the International Coffee Organisation (ICO) indicates a total of 167.47 million bags of coffee are expected to be deposited at the international market in the 2018/19 financial year.

The production exceeds the 165.18 million bags world consumption, which will create a surplus of 2.29 million bags.
“Given the stronger growth in demand, the surplus for 2018/19 is projected to be 2.29 million bags, around 1 million bags less than in 2017/18. This excess in supply continues to put downward pressure on prices that will likely continue over the next few months,” a report from ICO read.

The monthly average of ICO composite indicator fell by 8.2 per cent to 100.61 cents of a dollar in December 2018.
The daily composite indicator started at a high of 104.59 cents of a dollar and fell to a low of 97.59 cents on 18 December.
“After the first week, the daily composite indicator hovered around 100 cents of a dollar with a range of around 4 cents of a dollar. Coffee year 2018/19 is expected to be in surplus, though smaller than the one in 2017/18, which continues to put pressure on prices,” the report noted.
Prices for all group indicators fell sharply in December last year compared to the previous month.

The largest decreases occurred in the average price for Brazilian Naturals and Colombian Milds, which fell by 9.9 per cent to 102.10 cents of a dollar and by 8.2 per cent to 127.86 cents of a dollar, respectively.
Other Milds decreased by 7.3 per cent to 127.1 cents of a dollar, while Robusta fell by 7.1 percent to 77.57 cents.
As Africa’s leading exporter and second largest producer, Uganda’s production is steadily increasing, which has boosted by the good weather experienced last year.

Emmanuel Iyamulemye, the Uganda Coffee Development Authority, said last week: “Prices have been the lowest since 2002. However the forecast are positive on the other hand because the prices have started appreciating. The price which was Shs4,000 is now Shs4,600.”
There has been a reported increase in coffee stocks as dealers keep away from the market because of low prices.
However, Iyamulemye expressed optimism about the trends due to the entry of single sourced buyers who have directly shown interest in Uganda’s coffee.

Global market
Global coffee exports reached 9.88 million bags in November 2018, compared to 9.35 million in November 2017, indicating a 5.7 percent increase.
Exports of all groups, except for Milds, increased in November 2018 compared to the same month last year. In the first two months of 2018/19, exports of Arabica increased 13.2 per cent to 13.84 million bags compared to the same period in 2017/18, with the largest increase in shipments of Brazilian Naturals, which rose by 24.8 per cent to 7.92 million bags. Colombian Milds grew 2 per cent.
to 2.52 million bags, while Other Milds fell by 0.4 percent to 3.39 million bags. Exports of Robusta increased by 18.1 percent to 7.1 million bags.