The green bean price roller coaster


The ICO examines the surge in green bean coffee prices, the underlying factors responsible for reversing the low price trend, and how long the price increase will prevail.

The International Coffee Organization (ICO) has been collecting, processing and disseminating statistics and prices of coffee for almost 60 years, serving all coffee stakeholders in a neutral and professional manner. We have seen and forecast highs and lows, significant volatility and an impact on farmers, the incomes of exporting countries, industry and consumers. Now, what happens in 2021 as we all battle the vicious COVID-19 pandemic and growing climate shocks from global climate change?

Over the past 10 months, coffee prices have shown signs of recovery after experiencing four years of low levels, as shown by the ICO’s composite indicator price which stood at 160.14 US cents per pound in August 2021, which is an increase of 51.3% compared to October. 2020, the start of the current coffee year. The monthly average of the ICO composite indicator in August 2021 is the highest level since 162.17 US cents per pound recorded in November 2014.

Prices for both types of coffee, Arabica and Robusta, increased, although the gains were smaller for Robusta coffee. The prices of the two groups of washed Arabica (Colombian Mild and Other Mild) increased by 46.1% and 42.2% respectively from their levels recorded in October 2020. For Colombian Milds, the price of 225.40 US cents per pound hit in August 2021 is the highest since the 244.14 US cents per pound mark recorded in February 2012.

The price of Brazilian natural products (unwashed Arabica) increased 74.2%, from 100.37 US cents per pound in October 2020 to 174.89 US cents per pound in August 2021, which is the highest level. high from 181.43 US cents per pound recorded in November 2014. The Robusta price in August 2021 rose 39.2 percent to 95.18 US cents per pound from the monthly average of 68.36 US cents per pound in October 2020, and is also the highest monthly average since 98.39 US cents per pound recorded in October 2017. These upward trends were also seen on the New York futures exchange, which mirrors the market for the United States. ‘Arabica, and on the London futures exchange for Robusta.

Price movements since the start of the coffee year from October 2020 to September 2021 appear to mark the end of the low price levels that had worsened the disastrous starting conditions for millions of coffee farmers around the world over the past four years. years. But what are the factors behind this trend reversal? And how long will these price increases last?

In 2021, the ICO composite indicator reached its highest level since November 2014.

Supply / demand dynamics
As with most agricultural products, the main factors responsible for coffee price movements are related to supply and demand, especially production and consumption. However, less fundamental factors, such as fluctuations in the US dollar exchange rate and futures markets, affect trading activity and overlap with underlying fundamentals to influence the behavior and volatility of coffee prices. For coffee year 2020/21, total production is projected at 169.6 million 60-kilogram bags while world consumption for the same period is estimated at 167 million bags, resulting in a production surplus of 2 , 6 million bags compared to consumption. However, this surplus has been considerably reduced compared to its level in coffee year 2019/20. However, in statistical terms, the dynamics of the supply / demand ratio alone cannot explain the price movements over the past 30 years.

The factors underlying the recent upward movement in coffee prices are mainly weather-related shocks which have heightened supply concerns as consumption begins to grow again. Weather-related shocks began with a drought in Brazil from late 2020 to mid-2021. In November 2020, Hurricanes Eta and Iota hit Central America, with severe impacts in Honduras and Nicaragua. And more recently, in July 2021, many Arabica growing regions in Brazil were hit by one of the most intense frosts in living memory, with severe damage expected to affect Brazilian production for several years. Brazilian production for the 2021/22 campaign, which began in April 2021, was already expected to drop significantly, as this is the slack year in the Arabica coffee production cycle. In addition, the concentration of origins has fueled widespread concern over the availability of quality coffee, triggering price volatility. For coffee year 2020/21, out of 56 coffee-producing countries in the world, only three countries – Brazil, Vietnam and Colombia – represent 63% of world production. When you consider the next three largest producing countries – Indonesia, Ethiopia and Honduras – these six countries account for over 78 percent of world coffee production.

In regional terms, Brazil and Colombia in South America account for 45.9% of world production. Vietnam and Indonesia representing Asia and Oceania produced 24.2 percent, Africa, Ethiopia and Uganda account for 7.7 percent of world production, while Mexico and the Honduras for Central America and the Mexican region accounted for 5.9 percent. In total, the two countries selected in each region (eight countries in total) accounted for 83.7% of world production for the 2020/21 season.

Pandemic factor
Another major stressor in current pricing trends is the COVID-19 pandemic, as supply chains have suffered disruption due to blockages and restriction measures, resulting in delays in shipments, lack of containers and increased freight costs. The spread of the virus in coffee-exporting countries has disrupted local economies, restricted the supply of labor for harvesting and affected production by reducing farm maintenance.

For example, recent stricter lockdowns are expected to slow Vietnam’s production and exports over the next few months. The ICO has launched its second online survey to monitor the impact of COVID-19 in member countries. The objective of the survey is to assist ICO members and the global coffee community in assessing the short and long term impacts on the coffee sector and to identify available migration measures and resources. required.

The biggest rise in coffee prices can be seen in Arabica coffees: Brazilian natural, Colombian sweet and other sweet, with Robusta seeing smaller gains.

Will the current trend continue?
In the future, these price fluctuations are expected to continue, especially as climatic factors increase the likelihood of short-term supply shocks. There are too many variables in the supply / demand equation to be more precise. However, it should be noted that supply is still tight as demand returns to the level that prevailed before the pandemic. In addition, with the easing of restrictions related to the pandemic and the subsequent prospects of economic recovery, global consumption is expected to continue to grow.

If consumption continues to grow at the average rate of 2% per year that has prevailed since 1990, it will exceed 184 million bags in the next five years. Global production may not be able to grow at the same rate, as major climatic or environmental disasters can never be ruled out with such a high concentration of origins. Such an event would force prices to rise further. While current price levels are encouraging for coffee producers, escalating costs due to rising input prices, reduced availability of labor for agricultural activities in some producing countries and the decrease in land availability due to global warming are important factors limiting production. Coffee is a labor-intensive crop, poorly mechanized in many producing countries, and global urban wages are generally increasing.

In addition, the increased cost of fertilizers is likely to erode the gains from current high price levels. In growing coffee, the nutrients most widely needed to enrich soils and improve yields are nitrogen, potassium and phosphates. Nitrogen plays a key role in the healthy growth of the coffee tree and the formation of new branches and leaves. Potassium is necessary for the formation of fruits and seeds, while phosphate fertilizers aid in root development, flowering and fruiting. The costs of these fertilizers, already at high levels, are expected to increase further in 2022.

Finally, there is another important market factor that can also influence markets and complicate forecasting: the significant resources available for non-trade positions in commodity futures markets. These funds are often managed by operators who may have no inherent attachment to a specific product and little experience with it. Often their positions are not based on traditional market fundamentals but on external considerations or even guided by software package decisions.

The history of coffee is one of price spikes and falls, in which the first almost invariably leads to the second. The current situation is no exception. With an increasing concentration of origins in fewer countries, the weather will remain the main driver of the coffee market. Therefore, any concerns about the supply of these origins, unless substantial productivity gains are achieved quickly and efficiently, will intensify price volatility.

This article was written by Denis Seudieu, Chief Economist of the International Coffee Organization (ICO).
In April 1996, Seudieu was appointed chief economist at the ICO in London, heading the economics and projects section. He has contributed to the preparation, monitoring and evaluation of numerous development projects benefiting the coffee sector in producing countries. Over the past 25 years, Seudieu has participated as a speaker in various seminars and conferences.
The ICO is the premier intergovernmental organization for coffee, bringing together exporting and importing governments to address the challenges facing the global coffee sector through international cooperation. For more information visit

This article first appeared in the November / December 2021 edition of the Global Coffee Report. Read more HERE.


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