The average monthly price of Robusta coffee has reached its highest level in 28 years, according to the latest data from the International Coffee Organization (ICO). In May 2023, Robusta prices increased by 5.9%, averaging 122.55 US cents/lb. This is the highest Robusta price since August 1995, when it averaged 130.18 US cents/lb. However, the average prices of other coffee groups have decreased over the same period.
The ICO composite indicator price (I-CIP) for all coffee groups fell 1.7% from April 2023 to May 2023, averaging 175.48 US cents/lb. Colombian Milds and Other Milds recorded declines of 3.4% and 4.1%, respectively, while Brazilian Naturals contracted 4.3%. The New York market fell 2.2%, while the London futures market rose 6.8%.
The narrowing of the price differentials between Robusta and Arabica has been observed since mid-2022. This trend continued in May 2023, with the decoupling of the price of Robusta from the prices of the other groups. The relative increase in Robusta prices, coupled with inflation and rising interest rates, has contributed to a shift in the mix of coffee consumed, favoring Robusta over Arabica.
Supply factors also supported Robusta prices. Supply concerns in Vietnam, Brazil and Indonesia played a role, with Vietnam having already sold 90% of its current coffee crop. The Robusta supply from Brazil is significantly lower than in previous years and excessive rainfall has caused damage to coffee production from Indonesia.
Despite increased inventories of certified Robusta in London, arbitrage between the London and New York futures markets contracted by 13.8% in May 2023. Coffee price volatility, as measured by the I-CIP, stabilizes, and intra-day volatility decreases slightly between April and May 2023.
In terms of exports, total world exports of green beans decreased by 2.9% in April 2023 compared to the same month of the previous year. This decrease is explained by the fall in exports of Milds from Colombia and Naturals from Brazil. South America’s exports of all forms of coffee fell by 6.4%, while Africa’s exports fell by 9.8%. In contrast, exports from Mexico and Central America increased by 6.3% and exports from Asia and Oceania fell by 1.0%, but saw positive growth in Vietnam.
The increase in Robusta coffee prices is of considerable interest to ACRAM members. Robusta coffee is an important agricultural commodity for ACRAM countries, and any price increase can greatly benefit their economies. Higher prices should promote improved incomes for coffee-producing countries, allowing them to invest in infrastructure development, improving agricultural practices and the living conditions of their populations.
The additional revenue generated from Robusta coffee exports can be used to fund social programs, education, health care and other essential sectors, which promotes economic growth and poverty reduction in these regions. In addition, higher prices incentivize farmers to expand their coffee production and invest in quality improvement, which can enhance the competitiveness of African Robusta coffee in the global market.
The prospects for ACRAM’s small producers are particularly promising if the purchase price is fairly remunerated. Many smallholder farmers in Africa depend on coffee as their main source of income. An increase in the price of Robusta coffee would directly benefit these farmers, giving them higher returns for their hard work. This would improve their livelihoods, raise their standard of living and allow them to reinvest in their farms so as to diversify their income through new lucrative coffee-based businesses.
Solving the purchase price issue has the potential to positively impact a significant number of people, potentially improving the lives of thousands if not millions of individuals involved in Robusta coffee production in Africa and Madagascar. Moreover, the positive impact will extend beyond just farmers. Increased incomes for small producers would have a multiplier effect, benefiting local businesses and service providers, creating employment opportunities and supporting economic development in the region.