September 26, 2012
Ugandan coffee exports
slumped in August
Coffee shipments from
Uganda, Africa’s largest exporter of the bean and the second largest African
producer after Ethiopia, slumped to 233,151 60-kg bags in August, 24.5% lower
than the same month last season. The drop in exports, which followed July’s season
record of 306,631 bags, is the first fall in monthly volumes since April when
exports dropped to a season low of 141,220 bags, 20% below the same month the
previous season. However, since March every month’s exports has been lower than
the previous season, and by end-August total exports for the season came to
2.8m bags, 10.7% down on last season. The decline in Ugandan coffee exports
reflects the decreasing trend in the country’s Robusta output (accounting for
68.9% of coffee exports by the end of July) which is suffering from disease and
the lingering impact of heavy rains in May which delayed the harvesting and
drying of beans. By the end of July the share of Robusta in total coffee
production had fallen by 11.4% year-on-year while the share of Arabica had
risen by 39.8% over the same period. Overall we expect a total harvest of
around 3m bags in 2011/12, well below the target of the Uganda Coffee
Development Authority (UCDA) of over 3.3m bags, which will undercut the
country’s foreign exchange earnings from coffee. However, looking to 2012/13
the outlook is more positive with an expected recovery in production to the
level of recent years of 3.2m-3.3m bags.
Falling prices weigh on
Kenya’s coffee earnings
Kenya’s coffee export
revenues could fall sharply if the weakening trend in coffee prices at auctions
of the Nairobi Coffee Exchange persists. In August the average price paid for
premium Kenyan coffee slumped to US$167/50-kg bag, around half the level it was
in January, reflecting both higher supply of beans and lower buyer demand. The
slump in Kenyan coffee prices, which generally track Arabica prices on the New
York Coffee Exchange, reflects the broader trend in international Arabica
prices which have fallen from an average of 223.8 US cents/lb in January 2012
to 165.7 US cents/lb in August in response to a surge in production in Brazil,
the world’s biggest supplier, and softening global demand. Kenya earned US$260m
from 670,000 bags of coffee exports last year and expects to increase this to
over US$300m this season. But given the ongoing weakness in Arabica prices and
the expectation of similar volumes of exports in 2012 it is unlikely to reach
this target. Looking ahead to next season, for which planting typically starts
in September, the Kenyan Coffee Research Foundation has reported that demand
for coffee seedlings has been flat compared to the previous season, raising
concerns that some farmers may abandon coffee and switch to more profitable
crops.
Côte d’Ivoire’s coffee
exports surge in July
Coffee exports from Côte
d’Ivoire, Africa’s third largest producer, surged by 41.5% over one year ago
(oya) in July to 10,693 MT, reflecting the resumption of normal export flows
after the disruption caused by last year’s political crisis. Total coffee exports
from October 2011 to July 2012 have more than doubled year-on-year, reaching
78,954 MT, helping re-establish Côte d’Ivoire as a key supplier of coffee to
the global market after the damaging three-month embargo imposed in early 2011
that halted all exports of cocoa and coffee from the country. Coffee production
surged by 62.9% to 1.6m 60-kg bags in 2011 due to ideal weather, but is
expected to be smaller this season in response to poorer weather. The country
is hopeful of bettering its previous export record of 2.3m bags, which was
achieved in 2008, during the upcoming season, but much will depend on the
development of the coffee plants over the next few months.
Coffee price outlook
World coffee prices
weakened in August, with the ICO Composite daily index falling by 6% to 146.6
US cents/lb by the end of the month amid rising world coffee stocks and
indications of ample supply from Brazil, the world’s biggest coffee grower.
Production in Brazil is expected to increase by 16% this season as it enters
the high-yielding cycle of the biennial crop. World Robusta prices slumped 7.8%
to 109.3 US cents/lb in August, wiping out any gains made this year, while
Arabica prices fell a further 5.6% to 164.6 US cents/lb over the same period,
bringing the accumulated loss for the year so far to 27.6%. Although we expect
world coffee demand to remain strong, driven especially by emerging countries,
the outlook for demand in the Euro Zone economies is bleak and as a result
prices are unlikely to strengthen significantly over the coming months.
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Source: Ecobank Research