May 2013 C&CI • ICO Report • 21
At the ICO’s March meeting, Mauricio Galindo, the new head of operations, gave a presentation on recent market developments and the outlook. He noted how prices of Arabica coffees had lost ground from their peaks of a few years back, despite the Central American coffee rust crisis, but that the Robusta price had performed much better, in February achieving its best monthly average since October 2012.
Robusta prices
benefit from blending As a result of these divergent trends, the Arabica/Robusta arbitrage had narrowed considerably, he said, with the premium of New York over London falling to 50.49 US cents/lb, its lowest level since April 2009. At the peak two years ago, it was roughly three times this – a development that had encouraged a switch by roasters away from Arabicas in their blends to Robustas – which, Mr Galindo said, continued to find a ready market, given the “dynamic demand” in emerging markets. Despite the Central America crisis, the ICO reported in March, the outlook for the Arabica market appeared less bright than
The seriousness of the situation for Central American countries was underlined in a joint statement to the ICO’s governing council in which they stressed the importance of coffee to the local economies. There are more than 351,000 coffee growers in the region, they noted, and more than two million people depend on the coffee sector for their livelihood
for the Robusta, because of the record Brazilian 2012/13 (April-March) crop of 50.8 million bags and the imminent arrival on the market of its 2013/14 harvest. In addition, a build-up of stocks in Brazil was indicated by its lower exports in 2012 than in 2011 and Colombian production was recovering, as the coffee rust outbreak there came under control
and yields began rising thanks to the plantation renewal programme. Also bearish was the sluggish demand from traditional importers, the main buyers of Arabica coffee.
On promotion, the ICO in March agreed to set up a small group to work on implementing the programme agreed last year (see C&CI, November 2012, page 22), which calls for a “holistic” approach to the job, and approved four new project proposals for submission to the Common Fund for Commodities (CFC). The Amsterdam-based body, however, has made it clear to the ICO and other commodity agencies that they should increasingly look for other sources of funding for such projects, as cash is going to be tighter – and inevitably competition for it fiercer – in the period 2013-17, as the CFC restructures. A small group was also set up in March to prepare for the third meeting of the Consultative Forum on Coffee Sector Finance, which will be held during the agency’s next session. This will be in the Brazilian city of Belo Horizonte in the state of Minas Gerais on September 9-13, when the ICO will also be celebrating the 50th anniversary of its creation. C&CI
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