According to the International Coffee Organisation’s (ICO) June Market Report, the daily price of the ICO composite indicator increased steadily over the course of June, starting from a low of 118.53 US cents per pound on 1 June, and ending on a high of 132.04 per pound, its highest daily level since April 2015.
The ICO says these developments have been matched closely by movements in the exchange rate between the Brazilian real, which also hit its strongest level against the US dollar since July 2015. This will reduce the incentive for exporters in Brazil to release coffee to the international market, especially with domestic stocks suspected to be running low.
The ICO also said the market has also been reacting to the possibility of frost in Brazil, although any damage seems to have been relatively limited.
Total exports in May 2016 were slightly lower than last year on 9.3 million bags, the second consecutive month of reduced volumes. Nevertheless, total exports for the first eight months of coffee year 2015-16 (October to May) are up 1.6 per cent to reach a record 75.9 million bags, exceeding the previous high in 2012-13.
The ICO’s second estimate of world consumption in calendar year 2015 is maintained at 152.1 million bags, with a slight downward revision in importing countries compensated by an equal increase in exporting. This volume is up 1.3 per cent compared to the previous year, representing an average annual growth rate of 2 per cent since 2012.
The strongest growth in recent years has been recorded in Asia and Oceania, at an average rate of 5.2 per cent, well above the global average. This growth has come from both producing countries, such as Indonesia, Vietnam and India, as well as importing countries like Turkey and Japan, all of whom continue to exhibit dynamic domestic markets.
The ICO said North America has also shown relatively strong growth of 2.8 per cent in the last four years, adding 2.2 million bags of new demand in the time period. According to the US National Coffee Association’s Coffee Drinking Trends Survey, much of this growth has been driven by an increasing preference for espresso-based gourmet drinks from younger consumers.
Consumption growth in Europe has been more modest, at an average rate of 0.4 per cent, the same rate as South America, while Central America and Mexico is on 0.6 per cent. Total demand in the European Union is revised down slightly to 41.6 million bags, while in Brazil, the world’s second largest consuming country after the US, demand is maintained at 20.5 million bags. However, the Brazilian Coffee Industry Association (ABIC) has suggested that domestic consumption could increase during the current 2016/17 harvest.
Finally, coffee consumption in Africa has exceeded the global trend, at an average rate of 2.6 per cent. Much of this growth has come from countries such as Ethiopia, where coffee drinking has a long domestic tradition. The ICO said consumption is also anecdotally growing in developing countries such as Kenya and Tanzania, driven in large part by the increased popularity of coffee shops in urban areas, although this has yet to be reflected in the data.
According to the ICO, while the growth rate in coffee consumption has slowed slightly, this still represents 8.7 million bags of new demand over the last four years, with indications that there is plenty of potential for further growth in the future.