The International Coffee Organization underlined the setbacks facing production of mild arabica beans as it reported their premiums hitting multi-year highs over prices of rival Brazilian natural coffee.
The intergovernmental group noted that in Central America, the key producing region for “other mild” arabica beans, the Honduran “coffee industry is struggling with leaf-rust, or roya, which has hit the industry’s harvests”.
The country’s IHCafe coffee institute has downgraded its “exports outlook for coffee year 2021-22, twice already, from 5.823 million bags to 4.61 million bags”, the ICO said.
Neighbouring Guatemala “is also dealing with impact of a lower production, due mainly to climatic reasons and availability of labour, that is having a knock-on effect on the country’s exports”.
‘Persistent unfavourable weather’
Meanwhile, in South America, Colombia – which produces the vast majority of Colombian mild arabica beans, and which is the second-ranked arabica grower after Brazil – had seen “persistent unfavourable weather conditions reducing the available supply of coffee in the country”.
The country has suffered extreme wetness, as it often witnesses in periods of La Nina, which has now, unusually, set in for a third successive northern hemisphere winter.
The ICO highlighted the setbacks as it reported global coffee export data for August showing a “sharp downturn”, of 7.4% year on year to 1.19m bags, in shipments from Central America and Mexico.
August shipments of Colombian mild beans showed a “relatively sharp downturn” of 23%, to 860,000 bags, “driven primarily” by a 26% year-on-year slump in volumes from Colombia itself.
Arabica price differentials
By contrast, exports of Brazilian natural arabica beans “bounced back in August with a 7.1% increase,” to 2.85m bags, “driven by Brazil, the biggest producer and exporter” of the variety, which was amid a harvest which has replenished supplies.
In pricing terms, Brazilian natural beans fell by 1.0% month on month in September, leading a 0.2% decline in coffee prices overall to 199.63 cents per pound, as measured by an ICO indicator.
The underperformance allowed “other mild” beans, which eased by a more modest 0.4%, to expand their premium to Brazilian natural beans to 47.90 cents per pound, the highest since October 2020.
For Colombian milds, which fell in price by 0.5% last month, the premium over Brazilian naturals expanded to 74.50 cents per pound – the highest since August 2010.
Brazilian natural arabica beans also underperformed compared with robusta coffee, which on ICO measures was the top-performer in price terms for a third successive month in September, when it gained 1.6% to a 2022 high of 111.36 cents per pound.
Robusta beans cut their discount to Brazilian naturals to 108.23 cents per pound, the lowest in a year.
The ICO noted in Africa “the impact of drought in most of the coffee growing regions, which led to a lower and shorter main harvest season in central and eastern parts of Uganda, and hence lower output” in the continent’s top robusta-growing country.
Global robusta exports fell by 6.0% in August to 3.17m bags, fuelled by a 13.1% drop in shipments from India which, after a “good year so far” was showing signs of running low on supplies.
The ratio of production, compared with exports, “is falling sharply” for India to 1.12 in 2021-22, from 1.48 in 2020-21.
“The ratio is a good indication of supply availability. Therefore, it is possible that the sharp fall in India’s August exports is a reflection of the supply availability towards the end of a stellar” marketing year, which actually ended last Friday.
The underperformance of Brazil’s arabica prices has been noted too by research institute Cepea, which reported them falling by 4.3% last month, compared with a 1.5% dip in values of robusta coffee in the South American country.
On Monday, the premium of arabica beans to robustas fell below R$500 per bag for the first time since May, according to the institute, which reported greater confidence in the ongoing blossoming season which will largely determine the size of the 2023 harvest.
“The rains from late September may have improved crops conditions,” Cepea said, reporting that its sources said that while dryness had “resulted in losses of the first flowers” in some parts of Minas Gerais and Sao Paulo “farmers have been more optimistic about the possibility of a new blooming”.
Separately, Colombia’s Federación Nacional de Cafeteros growers’ group earlier this week reported weak data for the country’s production and exports for September, leaving output for 2021-22 at its lowest in nine years.
Last week, IHCafe revealed better hopes for Honduran coffee exports in 2022-23, seeing elevated prices as encouraging “better farm management”.