Coffee prices unaffected by higher output in Brazil

HUBLI, MARCH 14:

High coffee production in Brazil in crop year 2010-11 has failed to cool global prices.

ICO said in its monthly coffee market report: “Given the limited availability of arabica coffee globally, market fundamentals continue to favour firm prices. Moreover, world stocks need to be replenished as they are at their lowest levels in many years, and this may see a high level of export performance by coffee exporting countries in coffee year 2010-11.

“At the same time, however, current price levels do not encourage producing countries to retain stocks. Notably, in Vietnam producers continue to export and take advantage of high price levels. Adverse weather continues to affect the coffee growing areas in many parts of the world.”

Recent increases in prices of petroleum products are likely to add to production costs for most agricultural products, including coffee.

Coffee production for crop year 2010-11 is estimated to increase 8.6 per cent to 133.7 million bags compared with last year. A fall of 3.2 per cent is expected in the Asia and Oceania regions where Indonesia has recorded a significant decline due to adverse weather conditions. Production has increased in other regions, particularly in Mexico, Central America and South America, where Brazil has produced at least 48 million bags during crop year 2010-11. Colombian production is slowly recovering from the low levels of the three preceding crop years and an increase is expected in crop year 2011-12. Production is expected to increase in nearly all African exporting countries.

Although crop year 2011-12 is an off year in the biennial cycle for Arabica production in Brazil, a crop of more than 43 million bags is now expected. The difference between the high and low years of the Arabica cycle has fallen in recent years, which appear to indicate that further decreases may continue. Global coffee consumption in 2010 is estimated at 132.5 million bags against 131.2 million bags in 2009. Despite signs of a slowdown in some exporting countries, domestic consumption continues to develop, particularly in Brazil, which is the world's second largest consuming country after the US. The average annual growth rate of world consumption since 2000 is around 2.3 per cent.

(Source: http://www.thehindubusinessline.com/industry-and-economy/agri-biz/article1537671.ece?homepage=true)