I-CIP Rebounds in March 2022 on Sustained Demand

CoffeeNetwork (New York) – The latest report from the International Coffee Organization (ICO) notes that the ICO Composite Indicator Price (I-CIP) gained 1.8% from March to April 2022, averaging 198.37 US cents/lb for the latter. In April 2022, the I-CIP fluctuated in between 186.85 and 202.00 US cents/lb. Average prices for all groups indicators increased in April 2022. Prices for Other Milds outperformed all growths by gaining 2.7% to 265.40 US cents/lb from March to April 2022. Colombian Milds presented a similar growth rate of 2.4% reaching 292.64 US cents/lb from 285.81 US cents/lb. Brazilian Naturals increased as much as the I-CIP, gaining 1.8% where it reached 226.11 US cents/lb in April 2022. The price increase for Robustas was limited to 0.1%, reaching 103.96 US cents/lb. The average of the 2nd and 3rd positions of the London International Financial Futures and Options Exchange for Robustas decreased by 0.1%, bringing down the Robustas group indicator. The New York Board of Trade average of 2nd and 3rd positions for Arabica increased by 1.3% from March to April, reaching 225.37 US cents/lb. The differentials between the Colombian Milds and Other Milds decreased by 0.3%, from 27.33 to 27.24 US cents/lb over March to April 2022.

Presenting the strongest growth for this period is the Other Milds and Brazilian Naturals differential, rising by 7.8% from 36.46 to 39.28 US cents/lb. 50 75 100 125 150 175 200 225 250 275 300 325 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 US cents/lb Figure 2: ICO Group Indicator Daily Prices Colombian Milds Other Milds Brazilian Naturals Robustas Coffee Market Report – April 2022 3 The Other Milds and Robustas differentials increased by 4.4% to 161.44 US cents/lb. The Colombian Milds and Brazilian Naturals differential as well as the Colombian Milds and Robustas differentials grew by 4.3% and 3.7% respectively, reaching 66.53 and 188.68 US cents/lb in April 2022. Lastly, the Brazilian Naturals and Robustas differential grew by 3.3%, reaching 122.15 US cents/lb, a 99.7% rise since May 2021.

In April 2022, the arbitrage between the Arabica and Robusta coffees, as measured on the New York and London futures market, increased by 2.4% to 130.30 US cents/lb. Intra-day volatility of the I-CIP remained unchanged at 8.6% between March and April 2022 as for the previous month. Robustas presented the lowest volatility amongst all group indicators, at 6.1% for April 2022, whilst Brazilian Naturals volatility averaged 11.1% affected by the Brazilian Real gains against the US Dollar. The variation in volatility of the Colombian Milds and Other Milds for April 2022 is -0.4% to 8.0% and 0.1% to 9.1% respectively.

The London futures market remained the most stable at 6.4% whilst the New York futures market presented 10.4% volatility.

Certified stocks on the Arabica New York Futures Exchange were 1.20 million bags and certified stocks of Robusta coffee for the London Futures Exchange figured at 1.56 million bags, representing a decrease of 2.4% and 4.3% respectively.

Global exports of green beans in March 2022 totalled 11.79 million bags, compared with 11.48 million bags in the same month of the previous year, up 2.6%. The Brazilian Naturals and Robustas were the main contributors to the increase in export with 3.58 million bags and 4.65 million bags of green beans in March 2022 as compared with 3.44 million bags and 4.31 million bags, respectively, up 3.9% and 7.8% in March 2021. These increases completely offset the 7.0% fall in exports of the Other Milds, which fell to 2.38 million bags in March 2022 from 2.56 million bags in March 2021. Despite the rise in the total exports of green beans in March 2022, the shipment for the first six month of coffee year 2021/22 is down 1.4% at 59.29 million bags from 60.14 million bags in the same period a year ago. Decrease in shipments of the Colombian Milds and Brazilian Naturals are the main reasons behind the drop in the cumulative global exports of green beans, down by 10.5% and 11.5%, respectively. The former’s export fell to 20.05 million bags in October 2021- March 2022 from 22.65 million bags in October 2020-March 2021, while the latter’s exports fell to 22.05 million bags from 20.61 million bags, over the same period. Specifically, the underlying reason for the falls lies with Colombia as it is suffering from relative lower production due unfavourable weather conditions, whilst Brazil harvested a lower crop during Arabica’s “off[1]season”. Nevertheless, both countries continue to face supply chain issues, affecting coffee exports. Shipments of the Other Milds are up 11.4% in the first six month of coffee year 2021/22, despite the 7.0% fall in March 2022, at 10.59 million bags as compared with 9.51 million bags in October 2020-March 2021.

Exports of green beans Robusta for the first six months of the current coffee years reached 22.05 million bags compared with 20.61 million bags in the previously coffee year, with a 7.0% increase. Global exports of all forms of coffee totalled 13.16 million bags, compared with 12.65 million bags in the same month of the previous year, up 4.0%. Asia & Oceania is the main reason behind the rise, shipping 5.03 million bags in March 2022 as compared with 4.21 million bags in March 2021, an increase of 19.4%. This is the first time that the region’s exports have broken through the 5.0 million bags barrier, and it is also the first time that Asia & Oceania has taken the top position in volume of exports from South America since April 2018. In the first six month of coffee year 2021/22, global exports of all forms of coffee totalled 66.25 million bags as compared with 66.30 million bags. The 19.4% increase in exports of all forms of coffee by Asia & Oceania was due to Vietnam, which recorded an increase of 29.4% in March 2022 from 2.8 million bags in March 2021 to 3.62 million bags in March 2022. In the first six months of coffee year 2021/22, Vietnam had shipped 15.26 million bags, up 21.4% from 12.58 million bags in October 2020-March 2021. These sharp increases need to be seen as balancing the decrease (7.5%) that was recorded in the same period last year, due to logistical constraints- shortage of containers, rising freight costs, and port congestion at destinations in the United States and Europe. India’s shipments increased by 6.8% to 725,000 bags in March 2022 and by 37.6% to 3.51 million bags in the first six month of coffee year 2021/22. Exports from Indonesia decreased by 22.1% to 503,000 bags in March 2022, and up by 1.6% to 3.81 million bags in October-March 2021/22.

In October 2021 to March 2022, South America’s exports decreased by 12.1% to 30.11 million bags. During this period, shipments from Brazil declined by 17.5% to 20.74 million bags from 25.15 million bags in October-March 2020/21. Availability of containers and shipping capacity, albeit with reported improvements in recent weeks, and a smaller crop harvested during its Arabica “off-season” are the main reasons for the sharp fall. Colombian exports rose 1.3% in March 2022, with volume of coffee shipments increasing to 1.13 million bags from 1.12 million bags in March 2021. On the other hand, in the first six months of coffee year 2021/22, Colombia’s exports fell by 8.6% to 6.48 million bags, from 7.09 million bags in the same period a year ago. The fall in the exports is linked to persistent unfavourable weather conditions reducing the available supply of coffee in the country.

In March 2022 exports from Mexico & Central America fell by 10.1%, to 1.91 million bags as compared with 2.12 million in March 2021. Despite this reduction, in the first six months of the current coffee year, exports are up by 5.6% for the region, totalling 6.5 million bags as compared 6 Coffee Market Report – April 2022 with 6.16 million bags in October-March 2020/21. Honduras, the region’s largest producer, is the main reason for the region’s fall in exports in March this year, down 22.0% to 630,000 bags from 808,000 bags in March 2021. The decrease is linked to falling production, due to the impact of biennial drop on output and the impact of coffee leaf rust disease. Mexico’s exports fell in March 2022 by 9.3% to 332,000 bags from 366,000 bags. For the first six months of coffee year 2021/22, exports increased by 6.7% to 1.48 million bags from 1.39 million bags in the same period a year ago. Exports from Guatemala decreased by 10.1% in March 2022 to 394,000 bags from 438,000 bags in March 2021. For the first six months of coffee year 2021/22, exports increased by 7.5% to 1.23 million bags from 1.14 million bags in the same period a year ago.

Exports from Africa decreased by 3.8% to 1.24 million bags in March 2022 from 1.29 million bags in March 2021. In the first six months of the current coffee year, exports totalled 6.25 million bags as compared with 6.34 million bags in coffee year 2020/21. Uganda is the main reason for the region’s sharp drop in the March exports, which is due to lower production stemming from droughts in some parts of the coffee-growing regions of the country. In March, exports of Uganda fell by 16.6% to 478,000 bags as compared with 573,000 bags in March 2021. Despite this, in the first six months of coffee year 2021/22, exports are still growing, increasing to 2.88 million bags as compared with 2.87 million bags over the same period a year ago. Ethiopia’s exports rose marginally in March 2022, up to 230,000 bags from 228,000 bags in March 2021. However, for the first six months of coffee year 2021/22, its exports are significantly up by 20.0% reaching 1.43 million bags from 1.19 million bags during the same reporting period Tanzania’s exports were up 10.8% in March 2022 to 116,000 bags from 104,000 bags in March 2021, bringing the cumulative total for the year to 646,000 bags in coffee year 2021/22 from 663,000 bags in October-March 2020/21, with a decrease of 2.6%

Total exports of soluble coffee grew by 18.7% in March 2022 to 1.29 million bags from 1.09 million bags in March 2021. In the first six months of coffee year 2021/22, a total of 6.53 million bags of soluble coffee were shipped, an increase of 13.0 % from 5.78 million bags exported in the same period during the previous coffee year. As a result, the share of soluble coffee of the total exports of all forms of coffee has risen to 9.8% (measured on moving 12 months average) in March 2022 from 8.9% in March 2021. Vietnam and India have had the largest absolute expansions of soluble coffee exports, adding 167,000 bags and 108,000 bags to their exports for the first six months of the coffee year 2021/22 as compared with the same period a year ago. Brazil, Côte d'Ivoire, Indonesia, and Thailand’s combined export of soluble coffee recorded an increase of 265,000 bags in the first half of coffee year 2021/22 in comparison to the same period in 2020/21

Exports of roasted beans decreased by 2.1% in March 2022 to 78,00 bags from 79,000 bags in March 2021.

The latest provisional outlook for total production in coffee year 2021/22 remains unchanged at 167.2 million bags, a 2.1% decrease as compared to 170.83 million bags of the previous coffee year. World coffee consumption is projected to grow by 3.3%, to 170.3 million 60-kg bags in 2021/22 as compared to 164.9 million for coffee year 2020/21. In 2021/22, consumption is expected to exceed production by 3.1 million bags.

Alexis Rubinstein