6th AFRICAN COFFEE SYMPOSIUM

LIBREVILLE, 26 NOVEMBER 2018

African coffee supply management

against price volatility

Dr Denis Seudieu

Chief Economist

International Coffee Organization

Introduction

• Coffee price trend

• Coffee supply and price trends

• Strategy for African coffee sector

MONTHLY COMPOSITE INDICATOR PRICE

0

50

100

150

200

250

Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15

US

cen

ts/l

b

Nominal

Real

* Prices deflated using the UN index of manufactured goods with base year = 2000.

Price volatility

• Volatility is a measure of the tendency for a price to change over time. It is used to describe the risk associated with price fluctuations.

• In many exporting countries price volatility is a far more serious risk than risks linked to production.

• There are two main sources of income instability for coffee growers: production uncertainties and post-harvest price uncertainties.

Price volatility

• In the coffee industry market prices are the result of a number of factors ranked in hierarchical levels of determination.

• Price formation factors are found mainly in production, consumption and stock movements. At the same time, however, less fundamental factors come into play in trading activities, and may superimpose themselves on underlying supply and demand factors in such a way as to influence price behaviour.

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

1965/66 1970/71 1975/76 1980/81 1985/86 1990/91 1995/96 2000/01 2005/06 2010/11 2015/16

TH

OU

SA

ND

60

-KG

BA

GS

WORLD PRODUCTION AND AFRICAN SHARE

WORLD Africa AFRICA SHARE

0,00

50,00

100,00

150,00

200,00

250,00

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

1965/66 1975/76 1985/86 1995/96 2005/06 2015/16

US

CE

NT

S/L

B

TH

OU

SA

ND

60

-KG

BA

GS

WORLD PRODUCTION & ICO COMPOSITE

WORLD Africa ICO COMPOSITE

Coffee market in surplus

since 2015/16?

Supply & demand

140 000

145 000

150 000

155 000

160 000

165 000

2014/15 2015/16 2016/17 2017/18

Thousand 6

0-k

g b

ags

Production Consumption

COFFEE PRODUCTION AND CONSUMPTION(coffee years 1990/91 to 2017/18)

-

20

40

60

80

100

120

140

160

180

1990/91 1995/96 2000/01 2005/06 2010/11 2015/16

Mill

ion

60

-kg

bag

s

Production Consumption

0,00

50,00

100,00

150,00

200,00

250,00

0,00

2 000,00

4 000,00

6 000,00

8 000,00

10 000,00

12 000,00

14 000,00

1990/91 1994/95 1998/99 2002/03 2006/07 2010/11 2014/15

US

ce

nts

/lb

Mill

ion

US

$

EXPORTS VALUE & ICO COMPOSITE PRICE

Africa Asia&Oceania Mexico & Central America South America ICO COMPOSITE

COLLECTIVE POLICY RESPONSES

Retention (under APPC)

Differentiation• ICO/CFC Gourmet Coffee Project

Restrict Trade of Low-Quality Coffee• Resolution 407

• Resolution 420

Public Advocacy

Increase Domestic Consumption (Step-by-

Step Guide)

Consumption in African countries

by status (2014/15)

Per capita GDP vs. per capita coffee

consumption in African producing countries

Challenges

• Regional barriers to trade including

regulation on coffee imports from other

producing countries

• Limited opportunities for blending different

origins

• Regulatory framework

• Low competitiveness of the local industry

Conclusions

Conclusion

❖Like in the case of many other agricultural commodities coffee price will remain volatile due to regular imbalance between supply and demand

❖The strongest priority is to introduce measures which establish balance in the market

❖Within free market environment, encouraging domestic consumption remains a viable strategy to sustainable coffee sector

❖Enabling environment (regulatory framework)

Thank you