Higher costs of production and changes
in weather patterns may adversely affect the anticipated higher production in many
coffee origins. Costs of production are still high,
which leads many exporting countries with low productivity to curtail
expenditures on the maintenance of their coffee farms. Indeed, only exporting
countries with high productivity are more able to cope with rising costs of
production and falling coffee prices.
The following
is an excerpt from the International Coffee Organization (ICO) June 2012
Monthly Market Report
---
Source:
ICO
July 5,
2012
In June
2012 coffee prices, particularly those of Arabicas, continued the fall recorded
in recent months. The drop in Robusta prices was less marked than in the case
of Arabicas, leading to another narrowing of the differential between the two
types of coffee. The monthly average of the ICO composite indicator price fell
by 7.8% from 157.68 US cents/lb in May to 145.31 US cents in June, its lowest
level since June 2010. Moreover, the price volatility of Arabicas increased
while it decreased in the case of Robustas.
In
terms of market fundamentals, total production in crop year 2011/12 is
estimated at around 131.3 million bags, representing a slight decrease of 2.3%
compared with 134.4 million bags in 2010/11. For crop year 2012/13, an increase
of around 16% is expected in Brazil in relation to the previous crop year. Production
increases are also expected in other exporting countries, but the current
adverse weather situation may, in a number of instances, affect the quality of
beans. The current economic and financial crisis, which began in 2008, does not
seem to have had a major impact on world coffee consumption, which continues to
grow despite substantial increases in the retail prices of importing countries.
Exports
by all exporting countries during May 2012 totaled 9.9 million bags, bringing
the cumulative total for the first eight months of coffee year 2011/12 (October
2011 to May 2012) to 70.6 million bags, a reduction of 2.3% compared to 72.3
million bags for the same period in 2010/11. With the exception of Vietnam and
Mexico, exports have fallen in a number of major exporting countries during the
first eight months of coffee year 2011/12. Total exports for calendar year 2011
reached a record US$24.9 billion for a volume of 104.5 million bags, compared
with US$16.7 billion for 96.9 million bags in 2010.
Market fundamentals
Total
production for crop year 2011/12 is estimated at around 131.3 million bags,
representing a drop of 2.3% in relation to 2010/11 (Table 3). Production is expected
to decrease in two regions (Mexico & Central America and South America)
that accounted for 61% of total production during crop year 2010/11. Indeed,
production in South America is expected to decline from 62.9 million bags
during crop year 2010/11 to around 59 million in 2011/12.
The two
other regions are expected to record small increases in production: from 16.3
million bags to around 16.7 million bags in Africa and from 36 million bags to
about 36.9 million bags in Asia & Oceania. Arabica production is expected
to decrease by 5.2% from 85.2 million bags in 2010/11 to 80.8 million in
2011/12 while the production of Robusta is likely to increase from 49.2 million
bags in 2010/11 to around 50.5 million in 2011/12.
Production
prospects for crop year 2012/13 are somewhat mixed since higher production is anticipated
in Brazil, Vietnam and other origins, although changes in the weather patterns
of many major exporting countries may have an adverse effect on production.
Meanwhile,
costs of production are still high, which leads many exporting countries with
low productivity to curtail expenditures on the maintenance of their coffee
farms. Indeed, only exporting countries with high productivity are more able to
cope with rising costs of production and falling coffee prices.
Exports during May 2012 totaled 9.9 million
bags, bringing cumulative exports in the first eight months of coffee year
2011/12 (October 2011 to May 2012) to 70.6 million bags, a drop of 2.3% in relation
to 72.3 million bags exported over the same period last year (Table 4).
Brazilian exports dropped by 16.1% from 23.7 million bags to 19.9 million bags.
Exports of Ethiopia also fell by 28.2%, from 2 million bags to 1.5 million.
More generally, exports of Colombian Milds and Brazilian Naturals dropped by
17.8% and 12.3% respectively. Over the same period, exports of Other Milds and
Robustas increased respectively by 3% and 7.7%.
World consumption during the last four
calendar years is shown in Table 6. It is provisionally estimated at 137.9
million bags for calendar year 2011, an increase of only 0.6% on the previous
year. However, consumption in calendar year 2010 was 3.5% higher than the level
in 2009. This reduction in the estimated growth rate of consumption for 2011 may
be attributable in large part to high retail prices of coffee and macroeconomic
turbulence in some major importing countries.