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Coffee futures ease, despite Colombian output downturn

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July 6th, 2017

Arabica coffee futures eased despite data showing a fourth successive month of year-on-year decline in Colombian output, amid ideas that the drop represents only a temporary setback.

Colombia's coffee producers' federation, Fedecafe, pegged at 1.049m bags output last month in the second-ranked arabica-growing country, a drop of 9.8% year on year.

The figure represented the six time in the last seven months when output has fallen below year-ago levels.

And while Fedecafe showed Colombian exports up 3.4% last month, at 964,000 tonnes, the increase reflected comparison with a year-ago figure when shipments were interrupted by a truckers' strike.

Coffee Futures: Mitaca setbacks

Nonetheless, arabica coffee futures for December eased 0.6% to 132.65 cents a pound, amid ideas that a decline in Colombian volumes had been expected.

Merchant I&M Smith noted that Colombia's output for the first nine months of 2016-17, to June, at 10.74m bags, was still "55,000 bags higher than the same period in the previous coffee year".

The main, early-season harvest came in at bumper levels, with November 2016 output of 1.65m bags the highest for any month in 18 years.

"Everyone knew the mitaca harvest" currently in progress "was not going to be so good", particularly when compared with the strong 2016 crop, Rabobank analyst Carlos Mera told Agrimoney.com, noting too a decelerating pace of decline in Colombian volumes.

May production dropped at a rate of 13.6% year on year, with many observers talking of damage to plantations from heavy rains, including during parts of the harvest period.

Production dynamics "should keep getting better" as 2017 proceeds.

Coffee Futures: 'Surprise figure'

Mr Mera said that more puzzling than Colombia was the continued strength in coffee exports from Honduras, Central America's top producer, whose shipments jumped 71% year on year in June to 972,969 bags, according to data earlier this week from the country's Ihcafe national coffee institute.

"It was a surprise that exports were still so high when we are approaching the end of the season," Mr Mera said.

Indeed, there has been talk that Mexican and Central American supplies were largely sold out,

Hours before Honduras announcement Costa Rican coffee exports for June were revealed by the country's own coffee institute, called Icafe, to have tumbled by 21% to 124,516 bags.

Coffee Futures: Crop upgrades likely

Mr Mera forecast a round of upgrades to estimates for Honduran output in 2016-17, saying that "people are going to be thinking the Honduran crop was larger than they thought.

"It will be interesting to see if the harvest next season will get any bigger."

Typically, arabica coffee trees operate on a cycle of alternate higher and lower production, suggesting that Honduran output next year may struggle.

"However, you also have to remember that farmers planted a lot of news trees early in the decade," using strains resistant to rust, which was spreading through Central America, with these trees now starting to mature and produce beans.

 - Mike Verdin at Agrimoney.

See Also: Coffee, Cocoa, Cotton, Orange Juice, Sugar