The Hindu Business Line : Arabica props up global coffee market

STARTING from last quarter of 2004, arabica coffee market has continued to buoy into early this year with prices of around 107 cents a pound during January, substantially up from 70 cents during the same month last year.

However, robusta market continues to remain sluggish. While market fundamentals favour a consolidation of the upward trend in world arabica coffee prices, there is still a question of the impact of speculation triggered by position taking by investment funds, according to International Coffee Organization (ICO).

The optimism on arabica prices stems from the expectation of sustained demand against a relatively low supply in a number of exporting countries.

In January, the monthly average of ICO composite indicator price showed a new rise when the average registered 79.35 cents/lb compared with 77.72 cents/lb in December and 67.74 cents/lb in November 2004. Price movements in the first week of this month seem to confirm the continuation of the firm trend. With Brazil's first official estimate placing the coffee crop size between 30.7 million bags and 33 million bags, world coffee production in 2005-06 is tentatively estimated at 107 million bags, down 7 million bags.

World demand, on the other hand, is expected to be 114 million bags, up from 113.7 million bags estimated for 004.

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