The Hindu Business Line : Coffee prices seen firm in short term

COFFEE prices are expected to stay firm in the near term, as global stocks at the end of the 2005-06 crop season are estimated to hit a 10-year low of 149.4 million 60-kg bags. This is due to reduced output in major producing countries such as Brazil and Vietnam. Consumption, on the other hand, has increased elsewhere globally.

"This — short of normal stock holdings — would mean that prices should stay firm in the near term," said Mr C. P. Cariappa, Chairman, United Planters Association of India's (Upasi) Coffee Committee. Figures compiled by Upasi from various agencies, including United States Department of Agriculture and the International Coffee Organisation (ICO), indicate that ending stocks would be 149.4 million bags (of 60 kg), down from the previous year's 212.9 million bags.

The global output during 2005-06 is slated to touch 113 million bags, a fall of over six million bags compared to last year's 119.7 million bags.The consumption is estimated at 122 million bags. The drop in output is mainly due to the reduced crop size in Brazil and Vietnam (as a result of drought).

Mr A. L. RM. Nagappan, Chairman, Karnataka Planters Association, said growers were anticipating better prices due to this global shortage. Moreover, prices would go up further if the trade interest, which is currently focussed on oil, comes back to the coffee, he said.

Brazilian output is around 36.5 million bags (21.9 lakh tonnes) compared with the previous year's 42.4 million bags (25.44 lakh tonnes). Vietnamese output is down at 12.1 million bags (7.3 lakh tonnes) against 14.16 million bags (8.5 lakh tonnes).

Mr Anil Bhandari, former Chairman of UPASI, said the Arabica prices were expected to move within the price band of 95 cents-105 cents a pound till a clearer picture emerges in the coming months about the Brazilian crop next season. The global trade expects the Brazilian crop next season to be a bumper crop with various estimates pegging it between 45 million and 52 million 60-kg bags. If the Brazilian crop turns out to be good one, it is likely to place the price gains under pressure.

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